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Salesforce is reportedly in advanced talks to buy Slack in a bid to connect the collaboration with its sales and service clouds and expand its reach, but buying is about playing both defense and offense.
It’s hard to see in a vacuum the potential purchase of Slack by Salesforce as reported by the Wall Street Journal. This deal is not so much about roadmaps and product growth as it is about the competitive landscape. Sales and service have gone virtual amid the COVID-19 pandemic and largely will remain so. Yes folks, sales teams’ travel budgets will not come back to the remote workplace.
Salesforce’s biggest CRM rivals have collaboration platforms. Microsoft has Teams and its integration with Office 365 and a gaming platform. And Adobe has just acquired Workfront and can integrate this project management platform into its clouds. Communication and customer experiences merge: note that the purchase of Segment by Twilio for $ 3.2 billion illustrates the trend.
The competitive axis of CRM is Microsoft with partners like Adobe and C3.ai against Salesforce.
Salesforce has yet to pull off the collaboration game. Salesforce launched Chatter in 2009, bought Quip in 2016, and just rolled out Salesforce Anywhere, but doesn’t have the reach of Slack.
Nonetheless, Marc Benioff, CEO of Salesforce, has had a love affair for communication and collaboration for years. He even initiated the Twitter acquisition, but shareholder backlash thwarted the deal. Benioff lost on LinkedIn, which was bought out by Microsoft.
For its part, Slack has not taken part in the switch to remote work. Zoom has become the darling of collaboration as video conferencing has risen to the forefront of the stack. Microsoft Teams offers Slack-like functionality with better video communications. You could say Slack is on its heels and needs a buyer at scale.
Slack’s ability to connect businesses and partners through its Slack Connect would be critical for Salesforce, which owns Customer 360 but remains largely within corporate boundaries. Salesforce’s purchase of Slack gives it more leverage than Microsoft and plays into a larger Salesforce theme as a connector on multiple fronts such as apps (MuleSoft), analytics (Tableau), and collaboration (Slack) .
Simply put, Microsoft with Teams, Dynamics, and Office 365 can connect customers, vendors, and partners. Salesforce needs the same and could use Slack Connect to be the glue in the sales process.
This vision was laid out by Slack CEO Stewart Butterfield during the company’s second quarter earnings conference call on September 8. Butterfield was asked about Slack Connect and how it connects multiple businesses. He said:
The use cases that I’m most interested in are related to sales. Because it’s really good. I mean it’s great to have – for a complex sales process, which can involve legal negotiations and security reviews, the supplier approval process and everything in between, to have the leaders, the managers on the sell side and the buy side. monitor ongoing conversations. There is much less duplication of work. It’s much easier to bring someone in, all the reasons the channels are better.
But the other reason I like this use case is that it’s an argument to buy Slack, get revenue, which is different from buying Slack, get productivity. I’m 100% sure that the ROI from productivity selling is huge, like 100x or something like that because we don’t charge a lot in the grand scheme of things. But of course it’s always a harder sale to make, while buying our product, getting income is much easier.
Butterfield’s explanation sounds very Salesforce-ish. What Slack doesn’t have is the scale to include on larger purchases. Slack is a point purchase today. Salesforce would change that buying cycle overnight.
What analysts say
The reaction to a Salesforce-Slack combination is a bit mixed. Here’s a quick survey:
Cowen analyst J. Derrick Wood said:
Collaboration is becoming increasingly important as COVID-19 has potentially permanently altered the way businesses operate and communicate. As it is, Quip is CRM’s single point of contact for collaboration, but MuleSoft offers extensive integration capabilities across a wide variety of disparate applications. One of Slack’s main strengths is its ability to integrate numerous applications into Slack to enable better access control from a single UI environment, allowing sophisticated end users to streamline and automate. workflows.
As shared channels (from Slack) gain momentum, this feature could be used to deepen Salesforce’s vision of Customer 360. Ultimately, we see that Salesforce wants to push back Adobe, Microsoft and more. ‘other communication software, and it would be an offensive decision such a thing.
Tom Roderick, Analyst at Stifel:
A “Collaboration Cloud” would present Marc Benioff with another massive horizontal total addressable market that would appeal to both enterprises and SMBs and the addition of Slack CEO Stuart Butterfield to Salesforce would strengthen the executive ranks with another high end. exec. With Microsoft having great success with its Teams offering this year, combining collaboration and video conferencing with its ubiquitous Office365 offering, Microsoft has positioned itself very well for selling business productivity. The merger between Salesforce and Slack would position itself well for the “democratization” of enterprise software in a similar way.
Kirk Materne, Evercore ISI analyst:
The rationale for the combination is quite simple: Slack would provide CRM with a more robust collaboration engine to propel its Customer 360 vision (remember Chatter?) And Slack would benefit from leveraging the business organization and customer base. of CRM. There will be other nuances around Slack Connect and collaborative commerce, but the problem is that even with Salesforce’s weight in the enterprise market, competing with Microsoft Teams in its core market will be extremely difficult and convincing investors of the good. -based on this agreement. be difficult.
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