Salesforce-Slack acquisition a threat to Microsoft Teams

Salesforce's $27.7 billion acquisition of Slack could be a win for subscribers of the popular business messaging platform. But to make it so, Salesforce will have to invest heavily to create a standalone product that's competitive with Microsoft Teams, analysts said.

The acquisition, announced Tuesday, is Salesforce's latest assault on Microsoft's 365 office productivity suite, which includes the collaboration app Teams. However, succeeding against Teams will require non-stop investment in Slack and deeper integration among the service and other Salesforce products.

If Salesforce does that, then Slack would "become a pretty interesting and probably stronger alternative to Microsoft Teams," said Irwin Lazar, an analyst at Nemertes Research.

Also, Salesforce will have to avoid the missteps of the 2009 acquisition of GroupSwim, which Salesforce launched as an intercompany social network called Chatter a year later. Salesforce's development of Chatter was "very poorly executed," Lazar said. Customers didn't embrace the product because its user interface was difficult to navigate, and the application wasn't mobile-friendly.

Other analysts agreed.

"They haven't been a good steward of collaboration tools," said Dion Hinchcliffe, an analyst at Constellation Research.

Salesforce could have better luck with Slack CEO Stewart Butterfield, who will remain in charge of development once the acquisition closes. Salesforce expects to complete the transaction by the end of July 2021.

Butterfield founded the company in 2009 and built Slack into a messaging platform with 12 million daily active users. However, the company's revenue growth has slowed against more intense competition from Microsoft and Zoom. The two Slack competitors have experienced much higher growth from the rising demand for collaboration tools from white-collar employees working from home during the pandemic.

Butterfield said he believes he can make Slack stronger under Salesforce.

"The opportunity we see together is massive," he said in a statement. "Personally, I believe this is the most strategic combination in the history of software, and I can't wait to get going."

Slack as a separate product from Salesforce

Stewart Butterfield

Butterfield will run Slack as a standalone product to avoid losing "95% of subscribers overnight," said Alan Pelz-Sharpe, an analyst at Deep Analysis. Customers who are unwilling to subscribe to Salesforce to get Slack could turn to alternatives like Mattermost, Rocket.Chat or Google Workspace Chat.

As an independent product, Slack would join data visualization company Tableau, which Salesforce acquired in 2019 for $15.7 billion in stock.

The Slack acquisition would also benefit Salesforce subscribers, Gartner analyst Mike Gotta said. He added that he expects Salesforce to offer Slack as a tightly integrated messaging service at no additional cost. That would remove the expense of buying and managing a different product from another vendor.