Salesforce announced its much-anticipated acquisition of Slack earlier today, sparking nothing short of a battle over the cloud.
Salesforce made headlines last week when news broke that it was looking to acquire Slack. Talks progressed rapidly, with the deal announced a few hours ago. In the statement announcing the deal, Stewart Butterfield, Slack’s CEO and Co-Founder, provided a clue about what’s at stake:
Salesforce started the cloud revolution, and two decades later, we are still tapping into all the possibilities it offers to transform the way we work. The opportunity we see together is massive.
Despite being responsible for starting the cloud revolution, Salesforce has come under increasing pressure from other companies, most notably Microsoft. The Redmond company has made no bones about its intention to unseat Salesforce as the dominant CRM company. Most recently, Microsoft partnered with C3.ai and Adobe to roll out an AI-based CRM.
Similarly, Slack has been under increased pressure from Microsoft Teams. Teams doubled Slacks installed user base in November 2019 when it reached 20 million daily users. Its user base has exploded since then, reaching 115 million in October. Much of Teams’ growth has been the result of Microsoft’s bundling it with Office, a practice that prompted Slack to file an antitrust complaint with the EU.
Butterfield’s comment about “the opportunity we see together is massive” is indicative of just how much both companies need this merger. Since its IPO, Slack has never turned a profit. To make matters worse, Slack has not experienced the same pandemic-fueled boon like Zoom and other cloud platforms. It’s experienced significant growth to be sure, but not to the same degree as competing companies.
The combination of the two companies will help both fight Microsoft.
“The core reason for this deal in our opinion is to keep pace with the cloud behemoth in Redmond,” Wedbush analyst Dan Ives said in a note to investors Tuesday, reports CNN. “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 [Microsoft].”
It remains to be seen if the two companies will be more effective together, but it’s a good start. The combination of the two platforms helps both provide a more complete offering to its customers.