Salesforce’s announcement of its acquisition of Slack this past month, its largest acquisition in its 21 year history, has become a hot-topic for the remote-work industry. The enterprise behemoth declared that it will buy the company in cash and stock for almost 28 billion dollars (27.7 dollars to be exact). The deal comes as a big competitive move against Microsoft, whose Teams has been Slack’s biggest rival. With the recent lockdown procedures implemented all around the globe due to the pandemic, and many businesses going remote, the competition between Slack and Teams has intensified. Salesforce entering into the picture, however, means that big tech will reign over the industry, acquiring independent businesses left and right and potentially defying competition laws.
What is Slack?
Slack was initially founded in 2009 as an online gaming company called Tiny Speck. Its online game, Glitch, however, was a failure. This caused the company to shut down its gaming operations and focus on its chatting functions. Eventually, the company grew into an alternative to e-mail, with an emphasis on instant messaging between users. Users also have the ability to make public or private chat groups for teams and departments, as well as message other users individually. It was designed to work with other workplace tools such as GoogleDocs and Trello, making it a desirable app for those looking to expand their options in such tools.
What Slack is, is nothing out of the ordinary for SCL Student Bytes readers, as all of us have become all too familiar with such tools due to the effects of the COVID-19 pandemic. However, Slack was the first company to successfully materialise such an idea, and saw many of its core elements later implemented by Microsoft Teams. Hence, the rivalry between the two companies has become evident.
How will the deal work?
The integration of Slack into Salesforce does not mean a total sell-out on Slack’s side. The company will still keep its name and operations, and CEO Stewart Butterfield will continue to lead Slack as an operating unit within Salesforce. The app will be integrated into Salesforce Customer 360 Software, which collects a company’s customer information in one place. In summary, Slack will become Salesforce’s new interface for its remote-working tools. The sale is expected to close in mid-2021. Before Salesforce had acquired Slack, the company had gone public on the New York Stock Exchange last June. Trading was opened at 38 dollars per share, and went into free fall afterwards. Before the news, stocks varied between 25 to 32 dollars. After the news of the sale, they hit 44 dollars. The two companies had product integrations over the years, making it easier for enterprises to share data between the two platforms. Salesforce had its own social platform called Chatter, which was shut down in 2018 due to low consumer attraction.
Teams vs. Slack
Slack stopped being the underdog darling of Silicon Valley when it penned an open letter to Microsoft, after it rolled out its Teams app, in 2016. The letter read that “Slack is here to stay”, and warned Microsoft against the competition they were putting themselves into. Back then Slack had 4 million daily active users, and the number rose to only 12 million in 4 years. Whereas Microsoft had garnered 115 million daily active users by that time. The number was bolstered by the way Microsoft integrated Teams with its other Office products. Slack has failed to fully capitalize on the moment that the workplace applications had during the pandemic, and could not fend off its aggressive competitor, who became a household name during this process.
What role does Salesforce play in this?
“The events of this year have greatly accelerated the move by companies and governments to an all-digital world, where work happens wherever people are,” Salesforce said in its announcement of the deal. The company’s acquisition of Slack has given it an edge to fight its rivals Microsoft and Google, the latter of which is interested in growing its cloud computing division alongside its business collaboration tools. The two companies have been pushing their own tools heavily during the pandemic, and Salesforce wants a share of the pie. As Dan Ives, an analyst at Wedbush put it, “this deal will be a major shot across the bow at Microsoft”. The only advantage that Microsoft had before was its power in distribution, which Slack has now acquired through its integration into Salesforce, the world’s biggest customer relationship management (CRM) company. Alongside Slack’s gain in this megadeal, the acquisition will also help Salesforce position itself more strongly in the digital workplace space and put its name out there in the industry.
What does the acquisition mean for the industry?
With the popularisation of smartphones in the early 2010s came a new surge of workplace productivity tools as we know them now. What was once a flourishing market with many options has to now lend itself over to big tech companies, as we have seen through this acquisition. The heavy influence and control over the market by a few companies, namely Salesforce, Google, Microsoft and such, means the end of an era - an era where workers “gained new power to bring their own tools to the office and decide for themselves how they wanted to get the work done”. The golden age of choice in productivity has now come to an end, as big tech companies keep buying the independent companies that create and make popular such tools.
This acquisition is not novel. Adobe, an equally enormous company in the industry, acquired workforce management software company Workfront for 1.5 billion dollars this past year. As the pandemic fundamentally shifted consumer behavior, big companies wanted to chip in to the growing market, which proved to bring to an end the reign of independent companies.
How should the law react to this? A few months ago Slack filed an antitrust complaint against Microsoft in the EU for bundling Teams with Office. It asked the European Council to take action in order to ensure that the company did not illegally leverage its power from one market to another by bundling products, so that consumers would have no choice but to buy it. Slack further argued that Microsoft was using its dominance in the market, through Office, to force millions of people to download Teams, with no way of removing it from their device, or knowing that it was installed at all.
The case is all too similar to that which was opened against Google this past year by the US Department of Justice, due to its actions that were found to be against competition laws in the country. The company had made deals with Apple to make the search engine the default one for all their products, and hence gained leverage against competitors such as Bing and Yahoo. The surge of antitrust laws that have been opened against tech giants in the past few years have shown that there is a major lack of transparency and integrity in the way that these companies work, and surrendering a vital tool such as workplace productivity applications to major companies such as these proves to be a troubling problem.