Salesforce has confirmed reports that it intends to acquire Slack, saying that it will pay $27.7 billion in cash and stock for the workplace chat app. The deal, the largest that Salesforce has ever made, signals that the company intends to more closely compete with Microsoft as a one-stop-shop for all things productivity.
Deep pocketed rivals —
Launched in 2013, Slack garnered a cult following from pretty much day one, thanks to its bright colors and fun-loving "Slackbot" assistant that made the app feel less like a stodgy enterprise-focused product and more like a social network. The app was built around the idea that instant messaging is less cumbersome than email, though critics say that Slack creates an "always on" situation where employees are expected to be accessible at all times of day, like they would be in any other messaging app. Because Slack is so casual and fast-paced, people may not think through comments that could be taken the wrong way by colleagues.
Enterprise software companies eventually took notice of Slack's popularity, however, and today it faces intense competition from bigger rivals who have released their own similar products — most notably Microsoft, which has been pushing Teams onto its hundreds of millions of Office 365 users.
Back in the summer, Slack CEO Stewart Butterfield said that Microsoft is "unhealthily preoccupied with killing us." Microsoft already has a massive base of enterprises that it can push Teams onto, and it has done just that. The company most recently said it has 115 million daily active users for Teams, up 50 percent from only six months ago. Slack in comparison said it had 12 million daily active users in October of last year, but hasn't updated those number since.
Full productivity suite —
It's estimated that somewhere around 85 percent of Fortune 500 companies use Salesforce, which specializes in customer relationship management software that helps businesses manage online sales. With this acquisition, Salesforce could sell Slack to those clients — or it could upsell existing Slack customers on its other products, and in the process become something more akin to Microsoft, which offers a whole suite of products for enterprises from cloud hosting for their websites, to email, and even LinkedIn for recruiting.
With customers addicted to Slack, it may be easier for Salesforce to keep them within its own ecosystem for all their productivity needs. For the same reasons, Microsoft may have built Teams out of fear that allowing Slack to become too big could lead people to try out other productivity software instead of Microsoft offerings.
Salesforce's stock is down about 2 percent on today's announcement. That may be because the chat app's growth has slowed, but clearly the company is confident that Slack offers something it doesn't have.
Stock as free money —
Salesforce has a market value of $220 billion and its stock price has increased 70 percent this year. If Slack strengthens Saleforce's competitive position against Microsoft by making it more sexy, the stock will only rise and this acquisition will look incredibly cheap in hindsight. In the same way that Facebook's $1 billion acquisition of Instagram looks laughably cheap today — the app now accounts for a quarter of Facebook's revenue.
Antitrust regulators likely approved the deal because Salesforce didn't compete in productivity software, meaning the competitive market hasn't shrunk as a result. But the fact that Microsoft was able to kneecap an upstart's growth by subsidizing Teams is concerning.
