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This article was updated on Dec. 1, 2020.
Salesforce entered into an agreement to acquire Slack for $27.7 billion in mostly cash, bringing its users a familiar team collaboration app -- while also intensifying competition with Microsoft Teams.
Slack will be integrated deeply in every Salesforce cloud, according to the company, and will serve as the interface for its Customer 360 platform that gives users a full view of their customer activity across marketing, sales, e-commerce and customer service. Salesforce plans to close the acquisition by the summer of 2021.
"We've spent more than a decade focusing on this vision for a social enterprise ... this makes it all real," said Salesforce co-founder and CEO Marc Benioff during the company's quarterly earnings call Tuesday. "We see in Slack a once-in-a-generation company and platform. It's the central nervous system of so many companies."
If the deal passes regulatory muster and Slack shareholders approve it, the acquisition would be Salesforce's largest, by far eclipsing the $15.7 billion spent on data-visualization vendor Tableau in June 2019, which had been the biggest. Salesforce had made a few small acquisitions this year, including Vlocity and Mobify. But the Salesforce-Slack deal is a blockbuster for the company known for growth by acquisition.
Embedded into the Salesforce platform beyond integrations that are already available, Slack could be useful to users for facilitating conversations among sales teams, between sales teams and customers, as well as for customer service.
But the acquisition probably has a broader purpose, said Nicole France, Constellation Research analyst. Salesforce has long coveted back-office business data to feed into its platform, and a Slack acquisition would mark its latest attempt to get more of it.
The company bought GroupSwim in 2009 -- which became Chatter, what Salesforce at the time billed as "Facebook for business" -- and acquired Quip in 2016. Neither deal gave Salesforce the massive user base it had envisioned.
Predrag JakovljevicPrincipal analyst for Technology Evaluation Centers
However, Slack's 12 million daily users will yield both income toward Salesforce's aggressive $28 billion annual revenue goal by 2023, and provide data to feed into its AI projects.
"The Slack, MuleSoft and Tableau acquisitions all indicate that Salesforce is trying to extend its reach into enterprise organizations, and not be just the front-office customer application set," France said. "Slack is a significant reach toward doing that."
Predrag Jakovljevic, principal analyst for Technology Evaluation Centers, echoed those sentiments.
"They've been trying unsuccessfully to build a business desktop for a long time, only scratching the surface of sales, marketing and support," Jakovljevic said. "None of their products are really used all day, every day -- but Slack is."
Microsoft rivalry heats up
Salesforce and Microsoft have been in turns friends and fierce rivals over the years. Slack has an open antitrust case against Microsoft in Europe that alleges Microsoft's tying of Teams and Office together illegally stanches competition. That probably won't help relations between the two companies.
It isn't likely to hurt that much either, Jakovljevic said. Salesforce Marketing Cloud runs on Microsoft Azure, and because Salesforce and Microsoft apps integrate well for customers who use tools from both companies, the Slack acquisition adds up to "co-opetition as usual," he concluded.
A key concern in any acquisition where Salesforce steps outside of its sales, marketing, e-commerce and customer service comfort zone is: What happens to the acquired company's customers who aren't interested in Salesforce? For Slack users, that probably won't be an issue, France said, because Salesforce will likely want to keep them around. After all, many large organizations use both Slack and Teams for different departments and different workflows.
Jakovljevic agreed, pointing to another recent acquisition.
"Tableau, too, has lots of non-Salesforce customers, and I don't think Salesforce would be dumb enough to annoy and lose those customers," Jakovljevic said.
Partners, rivals weigh in
Slack hasn't grown during the pandemic's work-from-home surge as much as other collaboration apps. That was likely because Slack lacked a video component, said Raju Vegesna, chief evangelist at Zoho. The two companies are CRM rivals, but Zoho's business applications nevertheless integrate with Salesforce for companies that use both.
By some metrics, Teams had overtaken Slack in daily users late last year, before the pandemic's social distancing necessitated office closings and, by extension, more video conferencing meetings. Vegesna said Zoho's own video platform has seen five to 10 times increased usage, depending on whether it is for one-on-one calls, team meetings or webinars.
"That probably explains why Slack wants to wants to exit now, while the going is good," Vegesna said.
It will be interesting to see how competitors such as Microsoft, Oracle and SAP respond to Salesforce's Slack acquisition, said Dustin Grosse, chief marketing and strategy officer at Nintex, a workflow process management vendor that also is a Salesforce partner.
"I suspect that low-code digital process automation to drive stronger interoperation between CRM, ERP, HR and unified collaboration platforms -- like Slack and Teams -- will be the next focus area," Grosse said.
Salesforce also entered into an agreement to acquire Acumen Solutions, a professional services firm with a Salesforce specialty that caters to public sector, manufacturing and financial services verticals. It will become part of Salesforce Professional Solutions when the deal closes. Financial details were not provided.