It’s been just over a year since Salesforce closed its monster $27 billion deal for real-time messaging app Slack. The deal, which was one of the largest acquisitions in software history, was Salesforce’s attempt to enter the lucrative collaboration market dominated by the likes of Zoom, Google, Microsoft and others.
Slack not only gives Salesforce access to millions of potential new users, but it helps drive engagement amongst existing customers. While Salesforce may be the de facto CRM for many organizations, “relying on a separate platform (like Webex, Microsoft or Zoom) for collaboration takes users outside of the Salesforce ecosystem,” said Futurum Research analyst Shelly Kramer. That’s why Salesforce has been heads down since the acquisition, trying to integrate Slack seamlessly with its Sales and Service clouds and across its full suite of products.
As one of Salesforce’s most visible products, Slack will be front and center at this year’s Dreamforce. The biggest Slack-related announcement at Dreamforce will be a feature called Slack canvas, built from Salesforce’s shareable document software Quip. It’s another step toward incorporating Slack into the wider Salesforce family of products, which is critical in a highly competitive communication software space.
Slack has stopped publicly releasing its user numbers, but even with its most recent daily active user total in 2020, 12 million, Microsoft Teams was eating its lunch at 75 million. Teams reported 145 million users in 2021. Then there are challenges from Google, which has its own established workplace suite, and Zoom, which has recently placed a larger emphasis on its chat function.
“I’m pretty scared if I’m [Salesforce co-CEO Marc] Benioff with Slack, going into a recession,” said Wing Venture Capital partner Zach DeWitt. “I think Microsoft is going to be very aggressive on distribution and pricing over the next few years here.”
With Slack, Salesforce made a huge bet on the collaboration space. But with steep competition from Microsoft and others, is an underutilized tool that brought Salesforce co-CEO Bret Taylor into the company the missing link that could help the $27 billion bet pay off?
The Quip connection
Nate Botwick, formerly VP of product with Quip, oversaw the process of building Quip’s software into Slack. The fruition of that project is Slack canvas. Canvases will be collaborative documents within channels that compile files, checklists and other important information that could previously just be pinned as messages by users. They’ll link to workflows like requesting a work phone, and pull data from Salesforce Sales Cloud.
“It is a more persistent space to organize around this preexisting organization of channels,” said Slack senior vice president of product Ali Rayl. “This is a powerful thing we get with channels, which is that the right people are already there.”
Quip-turned-canvas has its roots in the Salesforce-Slack acquisition. Taylor co-founded Quip in 2012, and Salesforce acquired the product in 2016. Fast forward a few years and, according to Botwick, Slack CEO Stewart Butterfield approached Salesforce with interest in acquiring Quip.
Incorporating collaborative documents within Slack had been a part of Slack’s original pitch deck when it was first getting up and running, Botwick said. But as we all know, those talks ended with Salesforce acquiring Slack instead of Slack acquiring Quip.
“Both products independently had this vision of teams being able to work with both a canvas-like product and a messaging product together, but each product independently focused in different areas,” Botwick said. “Between Stewart and Brett, it was one of the things that they were both most excited about in this acquisition.”
Quip moved into Slack’s domain after the deal closed. The rest of Salesforce’s products, such as Sales Cloud and Service Cloud, are still external to Slack but integrated through “thin work,” as Rayl called it. For example, you can file a quick Salesforce expense report without leaving Slack. “You're not provisioning people to a bunch of different systems just so they can access one chart or one ticket,” Rayl said.
The connection to the broader Salesforce suite is a benefit for Slack, as it’s where employees are already working. But it's a play Microsoft also has, to an even greater degree.
Ross Rubin, principal analyst at Reticle Research, said companies are absolutely using both Salesforce and Microsoft products. The question is which ones they’re paying for, as Slack and Teams offer some features for free.
“There are many companies that are Microsoft shops,” Rubin said. “Do they need both? Teams can be a more general platform, whereas Salesforce might build functionality into Slack that’s heavily integrated into CRMs, for example.”
Futurum Research’s Kramer put it more bluntly: “Microsoft has pretty much won the collaboration wars,” she said.
Fitting into Salesforce’s vision
Salesforce knows it has a long road ahead if it wants to prove Kramer wrong in the collaboration space. Although co-CEOs Taylor and Benioff have called the company’s integration of Slack a key priority, it hasn’t all been smooth sailing. During earnings calls Benioff has alluded to integration challenges and realignments within the Slack organization.
Although there were a number of standard internal operational changes that come along with any big merger, such as moving from Slack Workday to Salesforce Workday, Rayl was quick to point out that nothing has changed about the way Slack thinks about its product.
“We still have the same goals for Slack. We still build the product in the same way,” said Rayl. Now the focus is, “How do we just expose all of Salesforce’s products in the best possible way inside of the Slack that we're already planning to build?”
The true measure of Salesforce’s strategy, however, will depend on Slack’s ability to add new users and also convert free users to paid ones. But Slack is cagey about disclosing the number of users it has. The company declined to share that information with Protocol ahead of Dreamforce, although it's a data point the company has shared in the past.
Since Slack doesn’t disclose its user numbers, it's not clear how many Salesforce customers are actually using Slack as opposed to, say Microsoft Teams. Slack leaders are confident the company is differentiated, but it's still expanding into the same areas as its competitors.
“I see Slack in the same boat as Zoom,” Kramer said. Both companies are in an uphill battle to build “true collaboration hubs that you live in all day, rather than a place you pop into for a meeting or a message.”
Regardless, Salesforce executives seem pretty happy about Slack’s performance so far.
“This is the fourth consecutive quarter we’ve seen more than 40% growth,” said Taylor during Salesforce’s first-quarter earnings call. And moving forward, Slack is expected to contribute about $1.5 billion towards Salesforce’s full year revenue guidance.
But if Salesforce customers aren’t actually using Slack for their work, the vision of becoming a digital headquarters that can compete with the likes of Teams and others begins to break down. Without data on the number of users, it's impossible to tell how close to that shaky reality Slack is.