- Salesforce is buying workplace chat app Slack for $27.7 billion dollars and CEO Marc Benioff said that the purchase is the culmination of his decades-long vision for workplace collaboration.
- This deal helps Salesforce become a "social enterprise" that is a hub of productivity, with integrations that can connect customer data, Benioff said on a call with analysts.
- Slack has become a hub to connect applications people use to get work done and that's exactly what will help Salesforce achieve its goal of offering businesses a 360 degree view of their customers, execs said.
- Ultimately, the deal allows Salesforce to seize an opportunity that will greatly benefit it in the long term, execs said, while analysts told Business Insider that it will also help ramp up its competition with Microsoft.
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Salesforce is buying workplace chat app Slack for the huge sum of $27.7 billion and CEO Marc Benioff say that the deal is the culmination of one of his decades-long goals: To make Salesforce into a hub for productivity and collaboration for business people.
"What this is all about is the value of the social enterprise," Benioff said on a call with analysts after the announcement, "And creating this incredible idea that you have this amazing hub of productivity, of collaboration and integration and applications that now leverage all this amazing data."
Salesforce got its start in 1999 by selling sales software and has since expanded into a suite of tools that manage almost any way that a business interacts with customers, like through service, marketing, and commerce. It callsits overall vision "customer 360," meaning that it aims to give companies a complete look at all their customers across all departments.
Key to that vision is having a collaborative tool that connects all these departmental products together. Salesforce has tried to add this collaborative element into its platform in the past, including by building Chatter and then acquiring productivity startup Quip in 2016. While neither tool has had much success tying Salesforce's products together, the Quip acquisition did bring in founder Bret Taylor.
Taylor, now Salesforce's chief operating officer, has played a big role in both leading Salesforce's product strategy closer to that goal and bringing the Slack acquisition to fruition, Benioff said on the call. Taylor worked with Slack CEO Stewart Butterfield on envisioning what an acquisition could look like and how together the firms could achieve the "ultimate vision" that Benioff and Salesforce cofounder Parker Harris have been working towards.
"I can't even think about how many conversations Parker [Harris] and I have had on this vision," Benioff said, "And then to see Stewart come in with Bret and make it all real. Well, that's just awesome."
Slack has built itself into a hub that connects with all of the other applications people use to get work done, including Salesforce. It's also recently introduced new tools that allow users to chat and work with people outside their organization.
By joining Salesforce, Slack will be deeply integrated into all of Salesforce's cloud tools, across sales, service, marketing, commerce, and more. It will essentially become the "new interface" to access Salesforce's customer platform, similar to how Microsoft integrates Teams with all of its tools.
How the remote work shift made Slack an attractive target for Salesforce
Just a few months ago in August, Benioff told analysts on Salesforce's Q2 earnings call that he didn't "really see an M&A environment," and that the company was instead focusing internally.
However, as the way people work has forever changed during the pandemic, so have Salesforce's objectives and goal, executives said on Tuesday's analyst call.
"We have to be opportunistic," Taylor said. "We've talked a lot about this shift in the economy and the relevance of Slack to our customer base that has obviously dramatically increased over the course of the year."
Ultimately, it was about seizing a chance that will greatly benefit Salesforce in the long term, he added.
The way companies interact with their customers has changed, and collaboration tools like Slack are enabling that shift. As Microsoft gets more traction with its chat and collaboration app Teams and beefs up its Salesforce rival Dynamics 365, this acquisition will help the duo keep pace, analysts told Business Insider.
"Slack — despite facing stiff competition from Microsoft — has been a clearly successful solution set further penetrating enterprises and thus looks like the natural fit for Salesforce to beef up its collaboration and messaging footprint and keep pace with Nadella & Co. with its cloud dominance," wrote Wedbush analyst Dan Ives in a note to clients.
There's also a strong customer foundation for the acquisition: 90% of Slack's enterprise customers are also Salesforce customers, executives said on the call.
While Slack has seen slower growth rates than Zoom during the pandemic, the product still has a lot more room to grow, and ultimately the merger will benefit both Salesforce and Slack's customers, Taylor said: "Every single customer engagement I've been involved with could benefit from this capability."
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