Salesforce vs. Microsoft: Clash of the Titans
By: Melanie Bialgues
Tags: Salesforce, Acquisition, Slack, News, Microsoft

The Covid-19 Crisis at the Origin of Remote Collaboration Market Boom

2020 is definitely not a year like any other. The Covid-19 crisis has accelerated the creation of a brand new arena in which battles are already raging: the corporate remote collaboration market. This acquisition comes at a time when this market has never been so highly valued with the increased practice of remote working imposed by the health crisis and lockdown.

Not only does the $27.7 billion purchase price for Slack far exceed Salesforce’s annual revenue, it also represents 12% of Slack’s $220 billion market capitalization. This makes it the largest deal in the industry ever, with all due respect to Microsoft, which bought LinkedIn in 2016 for “only” $26.2 billion.

Who dared to challenge the GAFAM giant? Founded in 1999 in San Francisco by Marc Benioff, Salesforce has since established itself as a leader in the corporate cloud software market by democratizing the use of SaaS as a collaboration and business communication solution.

On the other side of the table, Slack was launched in 2014 and allows its customers to create an unlimited volume of accounts and exchange channels (private or public) for teams, projects or otherwise, and administer them in a centralized manner. As a valuable tool for accelerating the organizational transformation of large groups and startups, the company has enjoyed great popularity since its creation, as evidenced by the platform’s 130,000 current paying customers, including 77 from the Fortune 100 (among which Target and Starbucks, ranked 114th in the Fortune 500). Its instant messaging tool has been particularly successful, and has become the pet peeve of the giant Microsoft, which had counter-attacked by adding the Teams tool to its Office 365 suite in 2016.

“The challenge is to be able to connect via Slack just like in the real world,” compares Ilan Frank, VP Product at Slack.

With the generalization of remote working, Slack had recorded a growth of nearly 350% in the number of calls made or received via its application in March 2020 compared to February. While everything seemed to be going well for Slack, with a number of users similar to Microsoft Teams (about 13 million), the company has experienced a setback since the beginning of the Covid-19 crisis. Microsoft has indeed widened the gap to reach 44 million users in mid-March, a domination that has only worsened with the great global lockdown. How did Microsoft achieve this feat? Thanks to the strategic move to make Teams temporarily free and accelerate its product roadmap to make it the cornerstone of the Office 365 suite. Faced with the tool’s more than 115 million users to date, Slack and its less diversified business model had failed to keep pace.

The Counterattack That Reshuffles the Cards

But things seem to be about to change. Salesforce has decided to take this opportunity to counterattack and turn the situation in its favor. While the strategy for several years has been to diversify its services beyond its famous CRM, Salesforce now intends to tackle the operational management of the company as a whole, a new 360-degree scope project that Microsoft has reason to be concerned about.

“It’s a match made in heaven. Together, Salesforce et Slack will shape the future of enterprise software and transform the way everyone works in the all-digital, work-from-anywhere world”, said Marc Benioff, president and CEO of Salesforce.

In addition to restarting the Slack machine, the buyout is also an opportunity to take advantage of the synergy created by the union of Slack’s customers and Salesforce’s 150,000 customers (mostly key accounts).

“As the new interface for Salesforce Customer 360, Slack will transform how people communicate and take action on customer information across Salesforce as well as information from all of their other business apps and systems to be more productive”, says Salesforce in a statement on its Web site.

The platform will now allow users to connect to their commercial back-office tools by making Slack a conversational programming and administration interface. By increasing business teams’ access to data, Salesforce will enable them to work more nimbly to break down silos within large organizations by reducing their dependence on business intelligence teams to monitor business unit performance.

A promising integration, whose success will require special attention given the cultural differences between the two companies (with the very playful and colorful Slack versus the sober and pragmatic Salesforce). Especially since Slack still allows users to connect to Microsoft Teams.

The year 2020 and its vicissitudes exacerbate the pace of the digital transition that had already been well underway. The evolution that was initially going to take place in 5–10 years seems on track to be achieved in just a few years. Low-code technologies and the agility they offer to these large groups suffering from the rigidity of their information systems, hampered by their large size, will prove to be key assets and advantages in the battles of this new arena. Cube will be there to assist them.