Salesforce has recently made its largest acquisition yet, with the acquisition of the most innovative business communication tool, Slack. A week prior to the acquisition, rumors had already started to circulate, which resulted in its stock price to surge. The CEO and co-founder was ecstatic about the announcement and stated that it is a “match made in heaven”. He also stated that it would change the way we do business in the current work from home environment. Most likely this is referring to combining Slack with Salesforce Customer 360, as Salesforce has described those plans already. They want to incorporate its communication software into every aspect of Salesforce Cloud and enhance current offerings.
Rough Industry Competition
Slack had just gone public mid-year 2019 but their shares had shrunk substantially soon after. The underdog was also facing extreme competitive pressure from one of the most well-capitalized firms in the world. Microsoft with its Teams platform was gaining traction quickly and was reporting 115 million daily users in October. Slack was doing extremely well given the circumstances, but sometimes you can only go for so long against a behemoth.
This acquisition is an indicator of how competitive the software industry has become. Being acquired is seen as a win instead of failing as a product completely. This is proof that Slack was a game-changing product in the eyes of the whole industry and was making waves. After rejecting many offers from the likes of Microsoft, Google, and even Amazon, it seems that it was finally time. As a result, Salesforce is now in direct competition with Microsoft Teams, its sometimes ally sometimes rival. Teams has been a large focus of Microsoft in the last quarter. Slack but with more capital now is a major threat to the progress that Teams has been making.
The Salesforce Plan
Slack is one of many in a long line of companies that Salesforce has purchased. They have developed an interest in acquiring both official Salesforce Partners, and new product technologies like Slack. This is resulting in substantial portfolio growth for the company and is diversifying all of their risks.
Salesforce is eventually becoming a singular platform for all types of technologies. CRM will become the gateway to a large ecosystem that is curated by them. Why go anywhere else while you’re already there?
They also don’t mind paying extra to achieve this long term goal, Slack did not come cheap. The $27.7B deal was their largest yet, and they are not going to stop anytime soon. They already provide a host of solutions to work alongside their CRM like carbon account and secure data encryption. To add more solutions and technologies to their ecosystem is the next logical step to create one ideal location for all required services.
Salesforce is slowly but surely on its way to becoming an even bigger industry giant. Each acquisition creates a ripple effect that affects other companies, like Slack affecting Microsoft, there are other similar cases. Every time Salesforce acquires something, it gives way to more discourse and speculation. It won’t be long until another firm becomes a part of the Salesforce portfolio, so let’s wait and see.
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