CRM Analysis: Salesforce’s Acquisition of Slack

Anthony Taylor January 7, 2021

One of the biggest tech stories of 2020 was the Salesforce year-end acquisition of Slack.

Slack – which had once boasted that it would replace email – lost its market share when Microsoft aggressively released and distributed Microsoft Teams. And both insiders and outsiders evaluating Salesforce’s long-term prospects have stated that Salesforce will need to compete effectively with Microsoft to breach the $1 trillion market cap.

Whether or not Salesforce can restore Slack’s prominence in the communication software marketplace remains to be seen, but the actions and announcements that Salesforce and Slack have performed since the acquisition indicate that they are ready and eager to make the attempt.

The Origin and Rise of Slack

Slack was originally internal software for an unreleased Tiny Speck game called “Glitch.” Tiny Speck released Slack as a standalone app on August 2013. Slack offered many features that were similar to Internet Relay Chat clients, including topic-specific chat rooms, direct messaging, and file transfers. Slack made all activity on its application searchable, though free users could only search the last 10,000 transactions.

The term ”Slack” eventually became an acronym for “Searchable Log of All Conversation and Knowledge.” One of Slack’s biggest strengths was its compatibility with third-party applications; its application directory – launched on December 2015 — has roughly 150 third-party applications which Slack users can download and operate. And the lack of competitors with equivalent functionality meant that Slack could enjoy profits and accolades despite its relatively small size and customer base.

In fact, a significant number of analysts have cited that Slack’s relatively small size made it simpler for Slack to tailor its software and features to its devoted customer base.

Microsoft Teams Overtaking Slack

CRM analysis: Salesforce's acquisition of Slack. Virtual talking with colleague and using video chat conference. Remote learning or work. Group of people smart working

Microsoft launched Microsoft Teams on November 2, 2016. Slack responded with a caustic “welcome” letter, definitely stating to Microsoft that “Slack is here to stay.” Towards the end of 2020, Slack had 12 million users, and Microsoft Teams had 115 million users. Slack’s attempts at updates – including an announced revamp of the software suite on March 18, 2020 – could not close the widening gap between Slack and Teams.

The combination of Microsoft’s market dominance, the coronavirus pandemic, and Teams updates such as compatibility with third-party applications led to Teams outperforming Slack, Google, and Zoom.

Slack’s Future Under Salesforce

Salesforce purchased Slack on December 1, 2020, for $27.7 billion, making it Salesforce’s largest acquisition at the time of purchase, as well as the second-largest software acquisition in history.

Salesforce acted quickly to promote and optimize slack, which could lead to a more tangible threat to Microsoft’s CRM market dominance. Microsoft’s greatest advance over Slack was Microsoft’s sales and distribution operations, which eclipsed Slack’s outreach and retention efforts. Salesforce’s acquisition of Slack lessens Microsoft’s sales and distribution advantage.

Slack also released a Salesforce for Slack app, which includes new functionality that promotes communication between the two software suites, allowing employees to access and react to Salesforce data through Slack.

Separate, Yet Together

CRM Analysis: Salesforce's acquisition of Slack. Two business people sitting in front of each other.

Despite Salesforce now owning Slack, both companies are framing the merger in a way that implies that both companies will remain independent of each other despite their collaboration and integration. This is not an unrealistic image for Salesforce, which has honored the independent operations and cultures of other acquisitions such as Tableau and MuleSoft.

Salesforce executives have stated that they see Slack as the missing communications component to their software suite, implying that Slack is a superior alternative to SalesForce’s own Chatter app. Salesforce is planning on using slack to integrate the comprehensive software suite together to maximize efficiency and team communications.

Both Salesforce and Slack have a history of unsuccessful competition with Microsoft; though neither the CEO of Salesforce nor the CEO of Slack mentioned that competition with Microsoft was a key factor of the merger, the companies will need to catch up to Microsoft – or regain the lead from Microsoft

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