December 21, 2020 | AtoZ Markets – The early 2010s saw a rise in smartphones which was quickly followed by a wave of new productivity tools, one of which was the workforce chat platform Slack. Bursting onto the scene in 2015, Slack immediately became the fastest growing enterprise software tool of all time, securing 1 million daily users within its first 18 months. However, since Microsoft passed on purchasing Slack in 2016, opting to create their own version with Teams, Slack has failed to secure the market.
Enter Salesforce. It came as a shock to very few when Salesforce announced its plans to acquire Slack in a deal worth $27.7 billion. This marks the enterprise clout giant’s largest-acquisition ever, furthering cementing its position as a viable threat to the nation’s second-largest tech firm by market capitalization, Microsoft. The tech giant and Salesforce already compete in the workforce productivity space with Microsoft’s Office 365 and Salesforce’s Quip. Salesforce also attempted to go head to head with Microsoft in analytics and business intelligence through its acquisition of Tableau Software for $15.7 billion as part of an all stock deal.
Why is Slack different?
Salesforce has been mirroring its larger foe’s moves in an attempt to tap into greater growth opportunities and overtake Microsoft in the professional services space. The strategy has so far been effective with the CRM powerhouse recently surpassing $20 billion in annual revenue. This was partly due to businesses looking to Salesforce in an effort to cut costs due to losses brought about by the ongoing pandemic.
Salesforce co-founder and CEO Marc Benioff intends on shaping the future of enterprise software and capitalizing on the new demand for remote working brought about by the pandemic. Through its megadeal, Salesforce plans to use Slack as the new interface for its Salesforce Customer 360 platform by deeply integrating it into each of its cloud services. Slack’s unified platform reduces companies’ dependence on messy emails and time-consuming calls while its new Slack Connect Platform enables companies to securely collaborate with each other. Thus, by intertwining its existing services with Slack’s platform, Salesforce will offer a more appealing alternative to Teams.
Is Microsoft domination at risk?
Not so fast. Salesforce investors have remained sceptical about the deal with analysts questioning the high price and the necessity of the takeover amid slowing revenue growth. Moreover, Microsoft still maintains juggernaut status in cloud-based business communications, with the number of active Teams daily users surging to 115 million in November due to increased demand for remote work, in comparison to Slack’s 15 million.
As work from home initiatives become the new normal Teams will undoubtedly continue to be a catalyst for MSFT stock. However, traders should keep a close eye on Microsoft and the impact Salesforce may have once their competitive product is refined. Thankfully, Teams is not a thing going for Microsoft; the tech giant also has both its cloud and gaming divisions which are both worthy of consideration.
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