General Resources
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A Complete History of Slack
Salesforce Acquired Slack in December 2020 for $27.7B for a variety of reasons. We breakdown why the Slack Salesforce Acquisition is good for the CRM giant's product roadmap, helps compete with Microsoft, and more.
History of Salesforce Acquisitions
Before we take a look at the reasons Salesforce acquired Slack in December 2020, it’s important to look back at a brief history of Salesforce’s acquisition strategy in general.
Over the past 15+ years, Salesforce has been known to pursue growth through an aggressive acquisition strategy across a variety of product and service companies.
Typically, their strategy is to identify existing SaaS vendors that build solutions complementary to the core Salesforce offering. This enables them to integrate those vendor's product features into the Salesforce roadmap and release features significantly faster than if they built the same functionality from scratch.
This has been seen in some of Salesforce’s most successful acquisitions:
ExactTarget was acquired by Salesforce in June 2013 ($2.5B) and is currently Salesforce Marketing Cloud.
RelateIQ was acquired by Salesforce in July 2014 ($390m) and rebranded as SalesforceIQ before taking the current name, Salesforce Essentials (the CRM offering for SMBs and Startups)
SteelBrick was acquired by Salesforce in December 2015 ($360m) and is currently CPQ Cloud.
This list goes on to include Demandware, Quip, CloudCraze, MuleSoft, MapAnything, Tableau and other acquisitions that have become core ‘Salesforce Clouds’.
The secondary advantage is that Salesforce absorbs the customer base from those acquisitions, which they are able to cross-sell on other Salesforce products - for instance, a company that was a Demandware customer (now B2C Commerce Cloud) could immediately be sold Service Cloud and Marketing Cloud, thus generating incremental revenue with ease.
A final benefit, in addition to acquiring technology & customers, is the ability to acquire talent. For example, Salesforce acquired Quip in 2017 (now Salesforce Anywhere) and Quip Founder & CEO, Bret Taylor, has been President & COO at Salesforce since November 2017. Former Vlocity Founder & CEO, David Schmaier, joined after their February 2020 acquisition by Salesforce and is currently Salesforce President & Chief Product Officer.
The ability to acquire true visionary leaders like Bret and David, in addition to the hundreds of talented, knowledgeable Architects, Developers, and Product Strategists brings immense intellectual property value to a large, incumbent vendor like Salesforce.
It all started with Salesforce Acquiring Quip
For those that closely track Salesforce's acquisition strategy, you will recall that Salesforce acquired Quip for $750m in 2016. It wasn't until early 2019 that Salesforce embedded Quip into their product offering but it had remained a standalone product until that point. Quip is a collaboration tool with a built in document management suite, including word processing, spreadsheets, and presentation software - all functionality Salesforce planned to embed at the platform level. In July 2020, Salesforce announced the launch of Salesforce Anywhere, which was essentially the re-launch of Quip as part of the core Salesforce product offering.
Salesforce Anywhere was the start of Salesforce's answer to Slack & Microsoft Teams - or at least, a very necessary upgrade that allows users & stakeholders to more easily collaborate while staying within Salesforce (remotely and from ... anywhere).
It's worth noting that Salesforce's VP of Product, Michael Machado, said back in 2019 that "the tool is focused on sharing Salesforce data, rather than being general purpose like Slack or any other business chat tool".
Core Features of Salesforce Anywhere
Salesforce was quick to adapt to the dramatic shift in work culture amid COVID-19 as most organizations scrambled to transition to remote work.
While many of the Salesforce Anywhere features were clearly on a roadmap well before COVID hit, others (like an IT Help Desk) may have been timely additions.
Here's a quick overview of the core features that were available in that initial product release:
Salesforce Help Desk integration: through a strategic partnership with Tanium (announced the same day that Salesforce Ventures invested $125m in them), this provides employees with a self-serve help desk chat to submit, track, and resolve service requests or incidents. The Salesforce support team can build workflows on Salesforce to further automate common tasks and leverage Einstein to prioritize incidents.
Real-time alerts: users can set customized, real-time alerts on desktop & mobile for specific updates across accounts, records, opportunities, or individual fields.
Team collaboration: features include chat, instant message, and video from within the Salesforce window. Native real-time chat will be powered by Amazon Chime with Zoom available as an out-of-the-box integration
Embed records & activity in chat: as Salesforce describes it, this enables users to "transition from data insights to data collaboration" - all within Salesforce. Easily generate reports, share across an entire team, and facilitate discussions around the data from a single view. No more hopping between Slack and Salesforce.
Update records on the fly: add comments to any record that needs a discussion and receive suggestions from Einstein for recommended actions to be taken.
Quip became Salesforce Anywhere and now Canvas
As with most things post-acquisition with Salesforce, we have seen Quip rebranded multiple times in just the last 4-5 years.
The September 2022 release of Canvas now puts document editor in your Slack chat window. While it looked like Quip was going to be Salesforce's answer to Microsoft Teams, it has clearly turned into an add-on feature for Slack.
Why did Salesforce acquire Slack?
As noted, there are a variety of reasons why a large player like Salesforce targets high-growth SaaS startups like Slack for acquisition. In this particular case, we have identified 4 primary reasons this $27.7B acquisition made sense in the eyes of Salesforce.
Product Roadmap:
The Salesforce ecosystem of products has grown larger and more complex over the years (largely driven by the aforementioned acquisition strategy) and a major challenge that comes with this type of SaaS portfolio expansion is building the communication layer that sits between all applications. This is not only about how data flows from Sales applications to Marketing applications but also how those teams are communicating and collaborating with each other, while operating out of different applications.
Salesforce has been investing heavily in their Customer 360 platform - a way to give enterprise organizations a unified view of the customer across marketing, sales, commerce, and support touchpoints - and the ability to communicate effectively at every stage in the customer journey is a critical element.
Let’s not forget that Salesforce acquired Chatter for $31 million way back in 2011 with the goal of building in-app communication & collaboration tools. The product was retired in early 2018 but Salesforce has always seen the benefit of integrating real-time chat and communication, so this is a big part of Slack’s value.
Ability to boost Slack’s revenue by selling it to the Enterprise:
As of 2020, 90% of Fortune 500 companies use Salesforce. Since founded in 1999, Salesforce has been looked at not only as a pioneer in Enterprise Software but as true go-to-market experts. They have assembled one of the highest performing global Sales teams and allocate close to $10B annually toward investing in Sales & Marketing.
This Enterprise market penetration gives them a foothold within massive, multinational accounts that could be introduced to the Slack platform. As of 2020, 156,000 organizations and 12 million users were on the Slack platform, which pales in comparison to the scale of Salesforce and the reach they have to dramatically accelerate growth. (As we will detail below, this is a segment of the market currently dominated by Microsoft Teams with very little competition.)
Equipping Account Executives with another tool in their arsenal carries virtually no incremental cost to sell Slack as part of the Salesforce package and can generate substantial, incremental revenue.
This aspect will almost certainly produce quick wins for Salesforce post-acquisition.
Gives Salesforce Access to the SMB market:
While Salesforce has always served earlier-stage organizations in the SMB market, they don’t often release products specifically targeting this segment.
The release of Salesforce Essentials in 2018 was a significant investment in the SMB market, though. There are 150+ million small businesses around the world that spend 23% of their workday manually inputting data, according to Mike Rosenbaum, EVP CRM Applications for Salesforce.
While this is a huge, growing segment, Salesforce has lost ground to several competitors with the most formidable being Hubspot. It is estimated that Hubspot has 29% market share in Marketing Automation, while growing 41% YOY, with a huge percentage of their customer portfolio sitting in SMB.
Despite much of Salesforce’s focus, attention, and capital going toward the Enterprise, SMBs and startups still present enormous opportunity and Salesforce understands the need to focus on this segment. Fortunately, Slack is deeply entrenched in the startup segment and can enable Salesforce to penetrate the segment with offerings like Salesforce Essentials, Pardot, and Salesforce Anywhere.
We should expect to see Salesforce allocate more time and attention in competing against Hubspot in the years to come.
Slack Developer and 3rd Party App Ecosystem:
When it comes to the top 3rd party APIs being used to connect a company's internal tools, Slack was used by 37% of respondents in a recent study on internal apps - #3 behind only GitHub and AWS. (Salesforce was 9th on the list with 16%.) This is an enormous advantage given the App Developer ecosystem that exists on the Slack platform. The Salesforce AppExchange is one of the largest B2B App Marketplaces, representing one of the fastest growth areas across all Salesforce products, and currently accounting for close to 30% of Salesforce revenue. (Note: Salesforce divides revenue into several segments. AppExchange falls into the Platform segment, which also includes Tableau and MuleSoft revenue.)
A platform like Slack is so deeply embedded in existing technology stacks that it's an extremely 'sticky' tool, meaning there is a high switching cost if companies want to move off the platform - this leads to lower customer churn.
App Marketplaces can be valuable in a number of ways by providing additional subscription revenue from Developers that pay to build on your platform (or share a percentage of their revenue) and by delivering value to your user base in the form of additional features, functionality, and integrations that your organization doesn’t need to invest in building.
To acquire a fast-growing platform with one of the largest B2B app marketplaces is a huge value in itself and something to watch as Slack continues to expand their own ecosystem. Several years ago, the IDC conducted a study that showed The Economic Impact of Salesforce, which was estimated to produce $1.2T of new business revenues and 4.2 million jobs between 2019-2024.
This is the power that effective SaaS ecosystems and marketplaces can have on the broader market.
Competition with Microsoft:
Microsoft has been a dominant player in consumer & enterprise technology for decades and the sheer scale of their user base afford them massive advantages.
Microsoft Teams (their communication platform and direct Slack competitor) wasn’t launched until early 2017. For perspective, by late 2020 Slack had grown their user base to 12 million, while Microsoft Teams had exploded to 115 million users.
This was largely based on their ability to offer Microsoft Teams as part of the Office 365 bundle for free and immediately tap into their enormous user base. It was announced in May 2021 that Microsoft would be partnering closely with Troops.ai, a long-time Salesforce partner and early Slack app developer that enables users of Salesforce to surface data, reports, insights, and more from directly within the Slack chat window.
What will Salesforce do with Slack?
(What have they done in the past?)
Salesforce has a mixed track record with post-acquisition integration. They have been criticized for ineffectively bridging the acquired company product roadmap with the core Salesforce features in some instances, while others have resulted in a good outcome but taken far too long to get there (Marketing Cloud was long considered a failure until recent years).
In other instances, they have been highly effective bringing the products together - for example, Quip was acquired in 2017 and has already been released as Salesforce Anywhere, which shows promise. Vlocity had a major advantage in that their suite of products were already built natively on the Force.com platform, so translating these to Salesforce Industries virtually overnight was simple from a technology roadmap perspective.
The acquisition that many feel Slack will resemble the most is that of Heroku - acquired in December 2010. Heroku is considered a PaaS (Platform as a Service) and enables Developers to build, run, and operate applications entirely on the cloud without having to manage all underlying infrastructure & hosting.
Since the acquisition, Salesforce has left Heroku to run independently and autonomously, which it has done very successfully over the past decade.
We detailed the incremental value Salesforce can generate from Slack but rushing to monetize this acquisition may not be necessary. It’s possible that Salesforce may simply help facilitate go-to-market strategy and invest heavily in Sales & Marketing to build Slack into a significantly more formidable competitor to Microsoft, rather than needing to re-design the core Slack platform in an attempt to fit it into the Salesforce box.
Slack to Salesforce Integration Overview
There is already huge value in connecting your Slack and Salesforce instance, which can be done through native integrations, using tools like Zapier, or with custom API development for more complex, bidirectional syncs.
Leveraging Slack to surface data & insights from Salesforce without leaving the Slack app can add quick productivity for your Sales Reps or companies are leveraging it to power internal collaboration and external communication across Sales, Marketing, and Support use cases.
Check out the Slack Integration Guide if you’re having trouble setting it up or Talk to a Salesforce Integration Expert through FoundHQ at no cost.
The Roadmap for Salesforce Digital HQ
This is how the roadmap looked prior to the announcement of Salesforce Genie at Dreamforce 2022.
The way Salesforce had been describing Slack's role in their core offering is "Digital HQ". It seems that Slack will serve as the foundation for all collaboration features that exist within Salesforce - these are the tools that enable cross-functional communication and sharing of data within a company using Salesforce, so that users in Sales can easily collaborate with users in Marketing or Finance. Previously, Salesforce relied in the limited features available from Chatter but Digital HQ takes this to the next level.
It seems there will be several components of Salesforce Digital HQ.
Quip is now Salesforce Anywhere
We haven't heard much about Salesforce Anywhere, other than the fact that it came from the acquisition of Quip (2016, $750m), whose founder, Bret Taylor, is now Co-CEO of Salesforce alongside Benioff. Salesforce Anywhere was launched in July 2020 and offered a variety of really solid features, including: Salesforce Help Desk Integration, Real-Time Alerts, Team Collaboration, Embed Records in Activity Chats and more.
It seemed that Salesforce Anywhere would be the primary collaboration tools to rival Microsoft Teams, the biggest Slack competitor in the market. But a mere 6 months after re-launching Quip as Salesforce Anywhere, the Slack acquisition was announced.
Slack is core to Digital HQ
Obviously, Slack is the central piece to Digital HQ. Not only does Slack offer the core chat interface and direct communication features that Salesforce needs to drive in-app collaboration, they have an incredible Developer and App ecosystem.
The Slack Directory has over 2,400 apps available along with a number of no-code automation solutions to build triggers between applications.
In August 2021, Salesforce announced tighter integrations between Slack and Sales Cloud, Marketing Cloud, Service Cloud, and Tableau. At their Trailblazer DX conference in April, 2022 Salesforce took it a step further and rolled out an extensive set of low-code Developer tools intended to bring Slack and Salesforce even closer. Branded the "Salesforce Flow in Slack toolkit", Developers can build Slack automations while re-using multi-step workflows in Salesforce that have been deployed using Screen Flows. As part of this release, Salesforce also introduced the Apex SDK for Slack, enabling Developers to use Salesforce's proprietary programming language, Apex, to fetch customer records and create reusable views utilizing the Slack UI framework.
The role of Troops is TBD
Given the capabilities that already exist natively within Slack and the tighter integration being built between Salesforce and Slack via new SDKs, it's a complete mystery as to what role Troops will play in the Salesforce product roadmap. The set of features available in Troops seem rudimentary compared to what is being deployed with Salesforce and Slack - the one exception being Slack's "Grid" product, which is a web-based inline editor that allows users to enter data and update records with a simplified view. It is very similar to the type of product companies like Scratchpad are building, effectively as an alternative to the Salesforce UI given it's design and speed are a constant point of frustration among Sales users. Regardless, nothing about the Troops product seemed sophisticated enough to warrant a significant price tag but perhaps the company was struggling because of the Slack Salesforce acquisition and this was an easy way to give select employees a soft landing.
Conclusion
In September 2022, there were a number of announcements related to the future of Slack. (Finally!) Time will tell how this roadmap eventually shapes up but it's clear that momentum is starting to build after the launch of Genie] (https://techcrunch.com/2022/09/21/salesforce-genie-brings-data-sharing-to-amazon-sagemaker-and-einstein/)and the release of [Salesforce Canvas.
We are also starting to see Salesforce Consulting Firms stand up dedicated Slack Consulting Practices, which was inconceivable up until now. There simply wasn't enough functionality or complex workflow automation to be built around Salesforce and Slack but many signals show that is about to change.
As anyone in the Salesforce ecosystem recalls, it took Salesforce multiple acquisitions to eventually acquire the functionality needed to launch Marketing Cloud as an industry leading B2C Marketing platform. This occurred over the span of a decade with billions spent on Radian6, Buddy Media, and ExactTarget. We should expect the path for Slack to be no different.
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