By Derek Wittenberg
Derek is a Managing Director at Progress Partners, with extensive experience in Enterprise Software and HealthTech; He lives in Brookline, MA, and is based in Boston.
January 20th, 2021 ? To end an already historic year, Salesforce announced on December 1, 2020 its acquisition of Slack – the largest acquisition ever for the enterprise software giant. Salesforce is adamant about extending its leading CRM platform to become the pervasive solution for back-end business operations. This $27B cash-and-stock deal significantly surpasses Salesforce?s 2019 acquisition of Tableau and, a year earlier, MuleSoft.
Stewart Butterfield, CEO of Slack, will continue to lead the company as an operating unit within Salesforce, making Slack its new interface: Salesforce will begin to adapt Slack?s aesthetic, rather than vice versa. This transaction will allow the cloud-based software company to expand its expertise and further penetrate the SaaS market. With the abrupt shift to fully remote business efforts during the pandemic, Slack?s real-time, horizontal communication interface bolsters Salesforce?s competitive stature.
This deal is one of the largest historically in the software space, behind Microsoft?s $27 billion acquisition of LinkedIn in 2016, and the combination will certainly pose a threat to other competitors as well. There has been great interest in the competitive landscape between Salesforce and Microsoft. The compelling parallel between these two industry bellwethers as the distinction between ?desktop productivity? and ?web-based collaboration? continues to blur. Slack, like Microsoft Teams, allows for users to efficiently collaborate while also connecting software tools and services. Slack has been a favorite among small businesses but gained only modest traction with the large enterprise market and was far from generating profitability in the intensely competitive business software market. Microsoft Teams has a competitive advantage in this sector, but now, with the Salesforce integration of Slack, this dynamic may change.
From my perspective, Marc Benioff and Salesforce are demonstrating great ambition to build upon the company’s strengths in CRM and cloud to take a bigger part of the Enterprise software stack through this acquisition. Slack represents an attractive target as a strong collaboration platform with the ability to move beyond email and offer a pervasive internal (and external) messaging and productivity channel, albeit an expensive one. Next stop: broader competition with Microsoft!
Will this endeavor really be ?A match made in heaven,? as stated by Marc Benioff? Or will the past challenges faced by Slack continue, now affecting Salesforce? The acquisition is scheduled to close in Salesforce?s second fiscal quarter of FY2022 after approvals of shareholders and regulators.
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