On Friday, December 4th, Second Eclipse Founder Jon Robinson was live talking about the recent acquisition of Slack by Salesforce. At Second Eclipse we use both Salesforce and Slack, and believe this acquisition is going to be great for B2B companies focused on growth.
We believe there are 6 key reasons for the acquisitions during the stream:
- Stewart Butterfield joins the Salesforce leadership team.
- Salesforce needs Slack to compete with Microsoft Teams.
- Slack couldn’t fend off Microsoft Teams on its own any longer.
- Salesforce doubles down on B2B.
- Slack fills a gap in Salesforce’s product portfolio.
- Slack opens up new revenue opportunities for Salesforce.
Here is a transcript and recording of Jon’s discussion of the acquisition. If you’re interested in live streaming for your business, contact us today.
Jon Robinson (00:22):
Hey, we are live talking about Salesforce and Slack. For those of you who are joining us on LinkedIn, welcome. For those of you joining us on Facebook, welcome. Why did Salesforce buy Slack? I think that there is a lot to talk about here. So that’s what we’re going to do for the next few minutes. On the Eve of Dreamforce Benioff, Marc Benioff, and Salesforce announced that Salesforce would be acquiring Slack, which was really one of the great tech startup stories of the past decade. They bought Slack for, I think it was 27, $27 billion, $27.7 billion. The numbers worked out to $26 and 79 cents in cash and 0.0776 shares of Salesforce per share of Slack. So if you own Slack, you’re basically making out with $40 a share, give or take depending on what the price of Salesforce is, when this all gets said and done. Which is nice.
Jon Robinson (01:40):
Salesforce is making a huge, huge acquisition buying Slack. Huge in a couple of different ways, right? It’s costing them a ton of money. And it is a dominant piece of software in B2B. So, I think that there are a number of reasons why they did this. First and foremost, I think that Salesforce bought Slack because of Stewart Butterfield. Now, if you look back at the Quip acquisition, they bought Quip, I believe not really because of Quip, but because of Brett Taylor, who was the former CTO of Facebook and has worked his way up the executive ladder, at Salesforce as well. And although Stewart Butterfield will continue to run Slack for the foreseeable future, I believe at some point Benioff will be taking Stewart Butterfield and putting him in a more prominent role, at Salesforce proper.
Jon Robinson (02:35):
So first and foremost, that is one of the reasons why, right. They were buying a company, but they were also buying a leader. Someone who had been proven. Butterfield was the co-founder of Flickr before Slack. And, he has the experience and he will do great things at Salesforce, just like he did at his previous company. So, when you look at some of the other reasons, I think the things that people are talking about a lot with regards to this acquisition are that Salesforce is competing with Microsoft on basically every front. A few years ago, Microsoft purchased LinkedIn. Salesforce was in the mix at the time for the LinkedIn purchase. And Microsoft obviously has been ramping up Teams, especially in wake of COVID.
Jon Robinson (03:41):
Teams has been getting a lot more adoption, mainly because it’s just included in Microsoft Office, which is something that, you know, Salesforce doesn’t have at their disposal at this point. That included a user base where they could just say, “hey, here’s Microsoft teams”. “You guys are now using this and we’re going to make it really, really friendly for you to continue to do so”. So Salesforce needed to compete with Microsoft. They lost on LinkedIn. Teams Salesforce doesn’t really have, or didn’t have something to compete with Teams. And you look at some of the other areas where Salesforce and Microsoft are competing. You’ve got Office vs. Quip. They obviously lose there. Salesforce loses, in that space. Microsoft Office is dominant in word processing, spreadsheets, presentations. In the CRM space, Salesforce wins, they have Salesforce CRM. Microsoft has Dynamics.
Jon Robinson (04:42):
There are some industries where Dynamics has more traction than Salesforce,. Sports and entertainment is one, but for the most part, Salesforce wins on the CRM front. And it’s their bread and butter. On the analytics front, Microsoft has Power BI. Salesforce has the Einstein-Tableau combination. I believe Tableau is getting embedded fully into Einstein over the next few years. But really Salesforce needed to compete with Microsoft and they didn’t have a competitor to Teams and Slack is the competitor to Teams. So, that’s another reason why they went through with this acquisition. On the flip side, I think another reason why this wound up going through is because Slack couldn’t compete with Microsoft. Microsoft has Teams. Slack has their chat application, but Slack could not compete with the array of other complimentary applications that Microsoft is able to offer.
Jon Robinson (05:50):
And also going back to the fact that Microsoft has Microsoft Teams, which they are essentially just giving away for free to every Microsoft customer. Slack filed an antitrust lawsuit against Microsoft back in July. And they were going to be fighting a big fight against them. And that was going to continue for a while. It was going to be very expensive and who knows what would’ve happened if Microsoft started pushing back against Slack on that front. So Salesforce wanting to compete with Microsoft and Slack, needing to compete with Microsoft. You put Slack and you put Salesforce together and now, on most fronts, right, we’re going to put Office to the side because that’s where Microsoft has their dominance. But aside from that, Salesforce is now very much head to head if not the winner, in all the other spaces where they are competing.
Jon Robinson (06:43):
So that is definitely something that is one of the, or two of the reasons why Salesforce made the Slack acquisition. Another reason why I believe is because Salesforce wanted to double down on the B2B space. They have some ancillary products that exist in B2C, things like Commerce Cloud. Marketing Cloud. They do apply to both B2B and B2C, but these products kind of live outside of the core Salesforce platform, you know, made through acquisitions that Salesforce has figured out a way to integrate them into core CRM. But really Salesforce has focused on B2B. And when you look at Slack and that acquisition, this is Salesforce saying, “we are doubling down on B2B”. Or I guess if you look at the costs, “we are tripling down on B2B”. And that is something that is now much more obvious to everyone who’s looking at this acquisition.
Jon Robinson (07:52):
Salesforce is saying we are going to be the dominant B2B software company. And the acquisition also gives Salesforce stickiness and lock-in, because of companies that are going to be using Slack and Salesforce, Salesforce does a very good job of making sure that the companies that are using their product are not only buying it, but are adopting it. And there’s this whole ecosystem of support and customer success that will help Salesforce maintain even more stickiness now that their customers are potentially using Slack and then adopting Salesforce after the fact. There’s a much larger user base within a company or adoption base of Slack versus just core Salesforce. There are employees who don’t use Salesforce who use Slack. That’s something I think that is really important to note: that Salesforce now has exposure to more employees at the companies that are part of their install base.
Jon Robinson (09:02):
My belief is that Salesforce really bought Slack–and you’re putting these other reasons aside for a moment–they bought it because of the possibilities that a Slack plus Salesforce product solution could present to their existing customers and potential customers. And what do I mean by that? Well, Salesforce has a number of products that are interrelated, but cover similar functionality,: Chatter, Communities, the recently introduced Salesforce Anywhere, which was a quick pivot during COVID. But these products are really to help foster communication both internally and externally at a company. This is the huge opportunity. Especially communities, right? Because communities is the true product that Salesforce sells. Chatter and Salesforce Anywhere are just embedded really into the core platform, but Communities and the adoption of Communities is a sellable product for Salesforce, and it is an expensive product.
Jon Robinson (10:25):
If you have ever looked at adopting Communities, you know, you have the cost of the Community product and then the total cost of ownership, which also includes the cost of implementing that Community, can be very expensive. It requires a significant amount of expertise and you have the potential to expose sensitive data, if not done correctly. Because you are allowing people outside of your organization to now have exposure to Salesforce records that exist within your CRM, through the Salesforce Community portal, think about what Slack could be in lieu of Chatter, Salesforce Anywhere, and Communities. Many B2B companies today use Slack to discuss things internally, and also sometimes bring their customers into private channels or single-channel guests into their Slack org to discuss client work. That could become the future of the Community for Salesforce. You’ve got real-time updates of support cases and communication about cases leading to quicker case-resolution times.
Jon Robinson (11:41):
You could have a CRM log of Slack messages, both internal and external. You can call CRM data natively into Slack, in a much better fashion and more fluid fashion than what is available today through the Slack-Salesforce integration. There is a lot of possibility of what you could do with a real-time communication platform and the plethora of data that a Salesforce CRM system has that is currently being used for internal and external use. I think that that really is the reason why Salesforce and Slack together is going to be really great for companies that are, Slack and Salesforce users. Wall street didn’t necessarily like the deal for Salesforce. The stock has been down since the acquisition was announced; perhaps Salesforce overpaid. It was a lot of money, but the future possibilities and opportunities for Salesforce and Slack really are immense.
Jon Robinson (12:42):
There’s both a horizontal expansion of Salesforce’s footprint that’s possible as well as a vertical expansion. So, horizontally more users, more organizations that already have Slack now can be exposed to Salesforce. Again, these are companies that use Slack for internal communication, but didn’t use Salesforce. Salesforce now has a way into these companies, and can learn about how many employees they have. What are the titles of those employees? ,Who are the people who are talking most actively, you know, they’re not going to be looking obviously at your private data, but there are quantifiable metrics. I’m sure that they can tell about the usage of your Slack org. So there’s more revenue potential there vertically. There’s also now more products for sales at Salesforce to sell. And I’m going to leave on this note because I think this one, when you talk about Salesforce, you really talk about revenue, right?
Jon Robinson (13:42):
They are a sales driven organization. By having Slack as an additional product within the Salesforce product SKU catalog, this is going to lead to more pricing conversations. And this is how Salesforce sells. If you look at things like API calls or file storage or Pardot contacts, these are all things that have soft limits within the Salesforce ecosystem. When you breach those soft limits, meaning that you can continue to use these things, but contractually you are not permitted to continue using them. So it leads to what Salesforce calls a “pricing conversation”. It’s a reason for the Salesforce account executive to pick up the phone and call you and say, H”ey, you’ve just breached through the number of set Pardot contacts that you are contracted to, or you are approaching your file storage limit, or you’re going over your API calls.
Jon Robinson (14:35):
And they can not only sell you more of those products, but start engaging you in conversations about other things that Salesforce has going on. In this case, Salesforce can look at Slack and they could say, “Hey, you’ve added new employees, you’ve onboarded, new Slack users. Maybe we’re going to sell you new Salesforce CRM licenses”, or “we see that you’re having a lot of growth in your marketing department. Let’s talk about marketing cloud.”
Jon Robinson (15:01):
Let’s talk about the data making its way from Slack on the backend, into the hands of Salesforce account executives. This gives them the ability to know more about what’s going on inside your business and what could be advantageous to your business. What they could potentially be selling you. Again, this is a good thing, both for Salesforce and for end customers, because there is now more transparency.
Jon Robinson (15:31):
There’s more knowledge. The conversations that Salesforce and their sales team is going to be having with your organization are going to be about things that matter to your business. You’re having growth. You need to know what are the things that your company needs to be adopting in order to support that growth and Salesforce plus Slack is going to be the way that they’re going to do that. So there’s a lot of revenue opportunities for Salesforce. It opens up Salesforce to a lot of new customers, a lot of new customers. It allows them to compete with Microsoft. It allows Slack to not have to compete with Microsoft. Uh, at least directly it gives Salesforce, uh, access to Stewart Butterfield, and I believe gives Salesforce a true Community product or potential Community product for communication between a business and its customers in real-time. Mobile and through desktop. So, great acquisition by Salesforce. I’m a fan of it. I’m a user of Slack. I’m a user of Salesforce for many years and I think this going to be great.
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