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Microsoft Teams in crosshairs as Salesforce announces acquisition of Slack to bolster its Customer 360 vision

Slack fits within Salesforce’s historical growth strategy

Salesforce (NYSE: CRM) has increasingly relied on inorganic growth to accelerate top-line revenue performance, such as its acquisitions of MuleSoft in 2018 for $6.5 billion and Tableau in 2019 for $15.7 billion. The addition of Slack (NYSE: WORK) would allow Salesforce to augment its robust, customer-focused products, including Sales and Service clouds, with Slack’s internal collaboration and communication platform, which contains a robust ecosystem of third-party integrations. Speaking about the acquisition during Salesforce’s 3Q20 earnings call, CEO Marc Benioff stated, “More than 90% of Slack’s enterprise customers are also Salesforce customers, but we also see how much further they can go.”

How much further Slack’s clients can go on their deployments will be contingent on Salesforce’s ability to articulate the value of the Customer 360 vision to the acquired clients. Execution of this portfolio strategy will be critical to complementing Salesforce’s inorganic growth by driving demand of existing front-office suites like Sales and Service clouds, in addition to broadening the company’s presence beyond the front-office with recent product launches like middle- and back-office-focused suite Revenue Cloud.

Integrating Slack’s value proposition with existing go-to-market efforts

The acquisition of Slack would bolster Salesforce’s Customer 360 portfolio strategy by adding a robust collaboration product at the center of the platform. This tactic mirrors recent investments by Microsoft (Nasdaq: MSFT) around Teams, such as tighter integrations with products like Dynamics 365, which, combined with enterprise needs as a result of the pandemic, accelerated Teams’ daily active user growth by a reported 53% from April to October. Further, the acquisition will increase the competitiveness of Slack in larger-scale multiproduct engagements, a dynamic the company struggled with in the past, given its lack of portfolio breadth compared to Microsoft. This is evidenced by Slack’s July filing of an antitrust lawsuit against Microsoft in the European Union, citing unfair market competition as the company frequently included Teams as a free trial within multiproduct bundles, such as Microsoft 365.

With this in mind, TBR believes the planned acquisition’s success will be contingent on Salesforce’s ability to integrate Slack’s value proposition as an internal collaboration into its customer-focused suites, thus allowing Salesforce to generate cross-sale opportunities within the acquired install base. For instance, Salesforce used investments around Work.com, a platform the company released in May in response to the pandemic, to create revenue opportunities from support for remote workforces. Specifically, Salesforce launched updates in September around employee engagement and productivity, including Employee Workspace, which provides users with a central hub to access and manage resources like learning platforms, payroll systems and collaboration applications, providing a clear path for integration with the capabilities that will be acquired from Slack. Aligning Slack capabilities with products like Work.com could help Salesforce differentiate Slack and use it to strengthen the Customer 360 portfolio strategy with clients.

After a week of market speculation, Salesforce confirmed ahead of its 3Q20 earnings call the company’s intent to acquire Slack for $27.7 billion, which would be the largest acquisition in the company’s history. The deal, which is expected to close in 2Q21, will be funded by a combination of new debt and cash on hand. The planned acquisition would inject an estimated $600 million in revenue in 2021, supporting Salesforce’s 2021 revenue guidance of approximately $25.45 billion to $25.55 billion, representing a yearly growth of about 21%.

Salesforce to acquire Tableau as the market moves to no-code and low-code environments

Salesforce’s acquisition of Tableau Software would make additional data visualization and analytics capabilities available to business users

Salesforce announced its intent to buy Tableau Software in an all-stock deal valued at $15.7 billion, in which Salesforce will exchange 1.103 shares of its common stock for each of Tableau’s Class A and Class B common stock. Salesforce has been improving its Einstein analytics capabilities with functionality such as preconfigured templates and drag-and-drop analytics that enables users to create data visualizations without code. Tableau would expand Salesforce’s data visualization and analytics capabilities, as its data sorting and no-code and low-code data visualization capabilities will enable business users to manipulate data and create new data visualizations without a data scientist. While Tableau would continue to run as an independent company, TBR expects Salesforce would create integrations between Tableau and Customer 360, Salesforce’s app that connects data from its sales, service, marketing and e-commerce offerings. Since data from Customer 360 can also be pulled into Einstein analytics, the integration of Customer 360 with Tableau would enable Salesforce customers to leverage Tableau’s technology from a central touch point. If finalized, the acquisition would also increase Salesforce’s value proposition as a front-office provider for Tableau’s 86,000 customers, creating new cross-selling opportunities.

Salesforce’s front-office provider partners and competitors develop no-code- and low-code-enabled data visualization analytics as the industry trends toward codeless data manipulation

Salesforce’s announcement comes four days after Google announced its intent to acquire Looker, an analytics and data visualization company. While it is unlikely that Salesforce’s planned acquisition of Tableau was in reaction to Google, these developments further highlight the increasing importance of data visualization in the public cloud market. TBR does not expect Salesforce’s partnership with Google would be significantly impacted by the vendors’ recent investments, as Salesforce’s broader SaaS portfolio still targets a larger front-office audience and Google remains a strong IaaS partner. However, Salesforce’s acquisition of Tableau would improve Salesforce’s position against Oracle in the front-office space. Oracle is improving its own analytics capabilities and unifying its data through CX Unity, its offering akin to Salesforce’s Customer 360. Additionally, the same day Salesforce announced its intent with Tableau, Microsoft announced AI Builder, which makes it easier for its PowerApps and Microsoft Flow customers to manipulate data to create AI models. Microsoft’s Power BI is in the same Power Platform product family as PowerApps and Microsoft Flow, showing Microsoft is trying to make it easier for customers to manipulate data as well. However, Microsoft’s Power Platform solutions still require a layer of coding and technical knowledge that exceeds the skill set of the typical business user. Given Salesforce’s and Google’s announcements, TBR expects Salesforce competitors such as Oracle and Microsoft may acquire data visualization companies to quickly enhance their capabilities in the space and level the balance of power in the public cloud front-office market.