Salesforce announced that it would buy Slack for $27.7 billion, The Wall Street Journal reported on December 1, 2020. Slack is a workplace communication software that went public in 2019. Salesforce, the global CRM leader, recently surpassed $20 billion in annual revenue and wants to expand further into the enterprise software business, according to TechCrunch.
The megadeal is the latest in a series of acquisitions induced by soaring tech demands amid the shift to remote work. Adobe, for instance, said that it planned to buy Workfront, the workforce management software company. Other companies, too, are focused on acquiring workplace collaboration tools, such as Asana, Airtable, and Dropbox.
Growing competition in the software market
Deals like this also indicate that tech companies are expecting the changes in the workplace in recent months are likely to be here even after the pandemic is over. This landmark deal makes it even clearer how competitive the software market has become. Industry analysts believe that in these times of ruthless competition, software companies need game-changing products to stay in the race. Otherwise, the companies will be acquired or fail.
Salesforce co-founder and CEO Marc Benioff said the deal was “made in heaven.” And that Salesforce and Slack, together, will shape the future of enterprise software development and transform the way people work. The acquisition of Slack also puts Salesforce in intense competition with Microsoft. The latter’s communication software Teams has been a direct challenger of Slack. It has made Teams a priority over the past couple of months — after remote work became mainstream.
A trail of M&A in enterprise software
This new deal comes after Salesforce bought the collaboration and document-sharing software Quip in 2016. Quip helped the SaaS leader to improve the ways people socially share documents. Slack and Quip together would enable Salesforce to transform its collaboration capabilities. And it’s likely to benefit the company base of CRM solutions users.
Demands for Slack’s communication and collaboration capabilities soared as a large chunk of professionals worldwide started to work remotely. Slack announced in September that its revenue increased 49% since July 2020 as the pandemic created significantly higher demand. At the same time, however, Slack faced intensifying competition from the software behemoth Microsoft. Teams, Microsoft’s tool similar to Slack, saw a notable surge in the number of daily users amid the shift to work from home.
Slack’s humble beginning
Slack’s founder & CEO, Stewart Butterfield, is known as one of the most ardent advocates of revamping the way companies use technology. He helped Slack grow out of a gaming company named Tiny Speck. The company’s product as an alternative to office email quickly became a hit in 2014. He is expected to join Salesforce and continue to run Slack as a division of Salesforce. Since its founding in 2010, Slack has grown impressively quickly, rejecting takeover offers from the likes of Google, Microsoft, and Amazon.
Salesforce’s post-pandemic test
For years, Salesforce has explored the possibilities of making deals with Slack. But as the COVID-19 sent millions of people to work from home, the megadeal became reality. According to tech industry analysts, the acquisition will transform Salesforce into one of the largest payers in the software business. But this deal comes with some challenges, as well.
If Salesforce wants to compete head-to-head with Microsoft, the company needs much more than what Slack offers, said Gregg Johnson, a former Salesforce executive. He believes that the company needs to scale up in areas like video technology. Microsoft and Zoom have attracted investors with their video communication solutions. Salesforce said that it plans to make Slack a primary interface for its customers. But industry experts argue that combining Salesforce with Slack will be challenging or may take time.
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