I’m not one to try and get a razor sharp analysis out before I have had my tea and rashers. There is a lot to ponder on this one, and it is rather long to tell.
Some context and a bit of a diversion
The big enterprisey software vendors are pretty good at doing stuff that involves one user at a time. It might be entering a sales order, requesting a shipment, confirming a bill of materials, following up on a lead, processing a payroll, invoicing, reconciling tardy debtors, pushing off creditors and so on. If the process is predictable, then they do an adequate job of passing work from user to user. For transactions of compliance or coerced nature, these applications are very very hard to dislodge. But when a process ends up requiring multiple users working on it at the same time, or in a more ill-defined way, then that work happens somewhere else, usually in email.
The attempts of the large process and transaction vendors to build collaborative tools have been many and diverse, but are united in the longer term by abject failure. I think of Jam, Chatter, Beehive, Duet and so on. The big enterprise vendors usually acquire or build a small lightweight collaboration tool, then strangle the user experience in the name of UX consistency then finally slowly integrate it to a painful death.
Should those users who willingly log on to big enterprise transaction centric software in order to collaborate, ever meet in person, it would be a small gathering, perhaps a fireside chat, or a rubber of bridge, but not a football team, never mind an American football team.
Improving user experience in enterprise software is a Sisyphean task. Enterprise vendors are doomed to build new user experiences, which by the time they reach the customer, require re-doing. I think will be discovering yet again that portals are a mistake. However the really big challenge is the space between the users. Mind the gap.
ServiceNow has made an aggressive play to wrestle the workflow control from the transactional vendors. It relegates the transactional vendor, shifting them away from the casual or managerial user back to the back office. It has created a better user experience for many business processes. A large portion of ServiceNow’s market capitalization accrues because enterprise transactional vendors have failed to deliver workflows that work for the end user. ServiceNow is where users now go to get stuff fixed. But it is not where they go to think and invent. ServiceNow only has part of the answer.
A bit about Slack
The limitations of email are many, but it stubbornly resisted all attempts to topple it as the generic communication and collaboration tool until Slack came along. Slack works precisely because it is light, simple, viral, unstructured and ad-hoc. It is particularly good at augmenting the software development process, one that involves lots of synchronous, asynchronous and hybrid communication. It did that one thing better than email did, and hence its success. Slack provides just enough process to help disseminate ideas. It began as tool for volunteer users, generating its user growth through use and network externalities, rather than software sales machinery. It is, as the mighty Anshu Sharma says, the Bloomberg terminal of developers, sales people and marketers. It generates an awful lot of data about what people actually work on when they aren’t doing transactions.
Slack was partly unlucky that Microsoft sensed the threat of Slack almost immediately, and reacted with alacrity, building out teams to be a robust competitor far more quickly than they have done to threats in the past. Microsoft’s response vindicated Slack, but it has had to compete with a Microsoft on top of its game. Slack also missed the massive growth of synchronous video communication, made possible by Zoom, but accelerated by Covid. It also did not grow as aggressively outside the US and the tech sector as it could have done. It should have built a much stronger enterprise sales engine, and the newspaper ad was not its finest moment. There is something quirky and naive about Slack.
But it has done something that no other vendor was able to do, which is make email almost irrelevant for those that use it. Without Slack, there would have been no Teams. Selling your company for 27 Billion is a win in the books I read. Massive respect to Stewart Butterfield, and thanks for making liberal arts degrees cool again.
So, why did Salesforce buy Slack?
First up, this makes a lot more sense than SAP buying Qualtrics did, but then that is a low threshold.
This is about volunteer users and especially the space between them. But there are good reasons beyond that.
- Salesforce is generating serious cash. It ought do something with it. Giving it back to shareholders would be a sign that Benioff had run out of ideas. Funding this is not hard.
- Salesforce has an excellent sales and marketing machine, its field and marketing could sell more products than their engineering can produce. I don’t think this is necessarily a bad thing when you at the scale of Salesforce. The opposite problem is far more deadly (see above).
- It makes Salesforce more relevant to another buying centre, software developers.
- It can’t go deeper into the platform business. Google, Amazon and Azure have made that impassable.
- It can’t build collaboration tools itself, and small acquisitions don’t cut it either, It has had several goes at it. Brett Taylor gets this space, having founded Quip. Buying Slack basically makes Quip irrelevant.
- It has proven with Mulesoft and Tableau that it can do big acquisitions. M&A at scale is hard.
- I sense this is a good culture fit. This is important. See Diginomica’s take here.
Is a good move?
Arguing that Microsoft has already won the collaboration tooling space or that it is their hallowed turf is a bit like calling an election before the postal votes are counted. Webex had the video conference market stitched up. Siebel owned CRM. This market is far from done. I’ve no idea is the price is a few billion to high or too low, but in the long run that’s not material. Heck most of us thought that Google way over paid for youtube and we were so wrong. I’m positive on this one. Fight me. In 5 years or so.
For slack users, this will be a good thing. A world class product and vision will get a world class sales machine.
What does this have to do with HRTECH?
In the long term alot of your HRTECH will be headless. By that I mean the front end will happen somewhere else. Slack will be one of those places. So will Zoom. Teams too. Invest more time in thinking about the spaces between your people.
Disclosure: neither Slack nor Salesforce are customers, and I’ve not attended any analyst briefings on this. I own a small position in Salesforce shares, about a new bicycle’s worth. I also bought Benioff’s latest book.
(Cross-posted @ Otter Advisory)