The recent acquisition of Slack by Salesforce for $27.7 billion marks a significant turning point, effectively concluding a remarkable startup story. Slack represented the quintessential Silicon Valley success narrative, evolving from humble beginnings as a redirection of a video game development firm. The company successfully secured $1.4 billion in funding, experienced rapid growth from initial stages to a $7 billion valuation, and ultimately completed an initial public offering, fulfilling the aspirations of many startup founders.

However, with this week’s events, Slack has become integrated into Salesforce, having been acquired in a substantial financial transaction.

Although the precise details of the negotiations leading to this agreement may remain undisclosed, it’s noteworthy that Slack’s Chief Executive Officer, Stewart Butterfield, revealed in a recent discussion that he wasn’t initially seeking a sale when he contacted Salesforce’s President and Chief Operating Officer, Bret Taylor, earlier in the year. His primary intention was to explore a potential purchase.

“My initial conversation with Bret occurred during the early stages of the pandemic, where I inquired about the possibility of acquiring Quip, believing it would be a valuable addition to our offerings. I wasn’t fully aware of their future intentions regarding Quip at the time. He indicated he would follow up, and subsequently contacted me approximately six months later,” Butterfield explained.

Following this exchange, the focus of the dialogue shifted, initiating a series of conversations that ultimately culminated in Salesforce’s acquisition of Slack.

Big money, big expectations

According to Taylor, Salesforce viewed the acquisition of Slack as a valuable investment because it effectively integrates all components of their platform. This platform has grown significantly beyond its initial focus on CRM to now encompass areas like marketing, customer support, data analysis, and workflow management. Taylor also emphasized that Slack provides Salesforce with a crucial communication element that was previously lacking, particularly vital in today’s predominantly digital environment for interactions with customers, partners, and colleagues.

“Our vision of Slack serving as the next-generation interface for Customer 360 centers on unifying all these systems,” Taylor explained. “The challenge is how to effectively coordinate teams around these systems in the current landscape of remote work and the increasing importance of collaboration.”

Butterfield recognizes a clear synergy between the tasks individuals perform at work, the automated processes within core business systems, and Slack’s potential to connect people and technology.

He suggests that integrating Slack into business workflows can significantly reduce complications often found in complex enterprise software such as Salesforce. Rather than relying on email, navigating links, launching browsers, logging in, and ultimately reaching the desired tool, approvals could be managed directly within a Slack message.

“When dealing with numerous actions daily, there’s a substantial chance to accelerate processes, which impacts not only the time saved by the approver but also the overall operational speed of the entire organization,” Butterfield stated.

Competing with Microsoft

Although neither leader explicitly stated the agreement was motivated by rivalry with Microsoft, it’s reasonable to assume this played a role in their decision to collaborate. Their combined strengths could be greater than their individual capabilities, and both organizations have experienced complex relationships with Microsoft in the past.

Slack has been engaged in a sustained competitive struggle with Microsoft and its Teams application for several years. Last year, it initiated legal action against Microsoft in the European Union, alleging unfair practices related to the free inclusion of Teams with Office 365 subscriptions. In a prior discussion with The Wall Street Journal, Butterfield expressed his belief that Microsoft views his company as a significant threat. Regardless of any exaggeration, a clear sense of competition and tension exists between these two enterprise software providers.

Salesforce and Microsoft also share a lengthy history, encompassing legal disputes in their early years, followed by periods of cooperation under Satya Nadella’s leadership since 2014, all while continuing to compete vigorously in the marketplace. Considering this background, it’s difficult to interpret the current deal outside of this context.

Neeraj Agrawal, a general partner at Battery Ventures, recently shared with TechCrunch his view that a key aspect of the deal involved challenging Microsoft’s dominance.

“For Salesforce to reach a $1 trillion market capitalization, it now needs to directly confront MSFT. Previously, the company had largely operated within its own defined product area,” Agrawal explained to TechCrunch.

Butterfield, however, while acknowledging the competitive landscape, refuted the idea that the deal was primarily intended to enhance his company’s position against its competitor.

“I don’t believe that was a major factor in the reasoning, at least from my perspective,” he stated, further adding, “the competition with Microsoft is overstated. Our main issue was the prevailing perception, which I attributed to effective public relations on their part.”

While Butterfield highlighted a roster of prominent clients in sectors like enterprise technology, insurance, and banking, Slack has historically been more popular with developer teams, where it initially established its foothold. Regardless of the actual situation, the partnership with Salesforce undoubtedly strengthens Slack’s ability to compete across the entire enterprise communications arena. However, both companies will also need to determine how to maintain a degree of independence within the new structure.

Keeping Slack independent

Taylor understands that Slack’s existing user base is carefully observing how the acquisition will be managed, and his organization will need to navigate a delicate balance. This involves both honoring the Slack brand and product’s autonomy, and simultaneously discovering opportunities to integrate with Salesforce and enable the CRM leader to maximize the benefits of its significant investment.

Achieving this will be challenging, but comparable levels of autonomy can be observed in Salesforce’s previous large acquisitions, such as MuleSoft, purchased in 2018 for $6.5 billion, and Tableau, acquired last year for over $15 billion. Butterfield notes that these two companies have demonstrably preserved their distinct brand identities and operational independence, and he views them as examples for Slack to follow.

“A similar degree of independence [to MuleSoft and Tableau] is essential because rebranding us as ‘Chat Cloud’ or something similar wouldn’t be beneficial. They invested a considerable sum in us, and therefore expect us to continue expanding on our existing strengths,” he explained.

Taylor, whose perspective is crucial in this situation, shares a similar viewpoint.

“Our goal is to establish a genuinely integrated value offering and platform for developers, while also safeguarding Slack’s technological independence, its platform-agnostic approach, and its brand identity,” he stated.

Better together

Regarding the union of these two organizations, both leaders recognize significant opportunities to integrate Slack’s communication capabilities with Salesforce’s established strength in enterprise-level software, ultimately creating a more powerful solution. Taylor believes Slack will play a key role in connecting these systems through streamlined workflows and automated processes.

“Considering automation, it operates on triggers and sustained procedures. Observing how users leverage the Slack platform reveals a focus on integrating workflows, bots, and related tools. The synergy between Salesforce’s advanced automation intelligence and the Slack platform presents a remarkable prospect,” Taylor explained.

The primary task for these executives, as they proceed with this acquisition and address the considerable expectations surrounding it, is to ensure its success. Salesforce possesses a track record of substantial acquisitions, with varying degrees of positive outcomes. Achieving a favorable result is crucial for both companies, and it now falls to Taylor and Butterfield to guarantee that happens.