In the last few days two really interesting acquisitions caught my eye. The obvious one that hardly could be missed, is Slack being acquired by Salesforce for a whopping $27.7 bn, which, to put it into perspective, is $2.2 bn more than Salesforce forecasts as its revenue for the upcoming fiscal year.

The other interesting acquisition is social network behemoth Facebook plucking up Kustomer, a five-year-old company with origins in customer service. What is interesting about Kustomer is that the company promotes managing customer service from the customer (hence the name) angle and not coming from the ticket as the main entity. Kustomer has since positioned itself more into the CRM area, but still with a focus on service “CRM for customer service” and also implemented an AI to help with routing and the end-to-end handling of (simple) cases by chat bots.

Digging a little further, one can find that Snapchat also recently acquired voca.ai, another tech company that specializes in serving natural, human-like conversations.

Salesforce acquires Slack

I have already covered the acquisition of Slack by Salesforce, and so have many other analysts. Thinking a little longer about it, yes, Slack gives Salesforce capabilities that so far only Microsoft can offer, albeit the balance of Salesforce’s productivity suite (acquired with Quip) is no match for Microsoft Office. Using both, MS Teams and Slack, I think that, with all its deficiencies, MS Teams has functional advantages over Slack. And it comes as part of MS 365 (formerly known as MS Office).

On the other hand, Slack as part of Salesforce is giving Salesforce customers that are not yet committed to a collaboration platform a choice. This is especially true, if Slack comes as part of the package, i.e. without an own price tag. The latter is something that I doubt, looking at Slack being on an ARR of around $1 bn and growing, and purchased at nearly $28 bn, but let’s see.

But then, Slack gives Salesforce an edge over SAP and Oracle, neither of which has a comparable offer. Oracle has a strategic partnership with Zoom, which places them high in the video collaboration arena, while SAP has Jam and a strategic partnership with Microsoft.

What Slack mainly provides Salesforce with are two things:

• A leg into the SMB market.
• A conversational UI that offers text, voice, video along with searchable file sharing capabilities.

Facebook acquires Kustomer

At about the same time, Facebook acquired Kustomer. Kustomer was founded around the idea of offering better customer service. This shall be achieved by providing agents better insight into the customer and by making the customer and the conversations with the customer the leading entities. These conversations can happen on arbitrary communication channels. This is in contrast to the traditional way of placing the incident at the centre and referencing the customer to it. To round this off, Kustomer also developed intelligent routing and a chatbot solution that help routing those incidents that are not deflected by the chatbot to the right agent.

You do wonder why a company like Facebook needs a customer service solution?

Well, as Ingrid Lunden also wrote in her readable article on TechCrunch, Facebook makes a sizeable business with companies that have a good deal of their, oftentimes the only, digital identity on Facebook and Facebook owned platforms. These are also regularly interacting with their customers via Facebooks messenger or via WhatsApp. According to Facebook’s own press release, there are currently more than 175 million people who contact businesses via WhatsApp. Up to now, these businesses used, and can continue to use, third party services for customer interactions. Now they can use a Facebook owned service, too.

So, the value of Kustomer for Facebook is twofold:

• It can bring additional revenue streams, directly by the customer service offering, and indirectly, by making it easier for Kustomer customers to create advertisements on Facebook
• Facebook can capitalize on the increasing trend towards conversational user interfaces

The common theme

What do these seemingly different acquisitions have in common?

Both of them revolve around conversations as an important way of interaction between people. This is the natural continuation of texting and messaging having entered the mainstream some years ago, at first in consumer applications, and then more and more in business applications, too.

As I have written in my article about what can be done to make sales people not hate their CRM system, one key ingredient is to make the system “speak with people”, i.e. offer a communication channel that is natural for people and reduces the friction between the communication parties as much as possible (or at least does not create unnecessary additional ones). These communication channels are text and voice, and this preference is, of course, not limited to salespeople.

Or, as Shane Murphy-Reuter, SVP Marketing at Intercom, puts it: “Messengers are how we communicate in our daily lives. They’re also transforming how colleagues communicate at work and are increasingly becoming the primary channel between businesses and customers. Consumers prefer messengers because they’re fast, friendly and personal. The shift toward conversational technologies is accelerating because messengers help businesses build strong relationships with their customers by providing a friendly, quick and easy customer experience that’s just like a face-to-face conversation and makes online communication feel much more personal.”

What does this mean?

This is a question that goes far beyond the immediate consequences for Slack- or Kustomer customers.

The conversation is the new UI

These acquisitions show the acknowledgement of a trend that in my eyes has reached a tipping point. Customers – people – want to communicate with businesses and their representatives in a way that is natural to humans. They expect businesses offering this capability.

The necessary communication channels exist since the advent of social media and mobiles becoming mainstream. Technologies that help businesses scaling communications are there, too. Chatbots and conversational AI’s are coming of age and are maturing rapidly.

Businesses leaders who have not yet started to offer conversational user interfaces to customers (and employees alike) need to act fast in order to keep pace with the demand for this type of user interface. They need to start implementations on limited but relevant scale, learn and grow from there.

Vendors need to build, buy or partner to offer convincing own conversational capabilities throughout their solution stack, starting from where it matters most (to their customers). Missing out on this will have a negative impact on their relevance going forward.

The conversation is the new UI. Are you prepared for it?

The News

Today various media outlets broke the news that Salesforce is in advanced talks with Slack Technologies about a possible acquisition. The news had two effects: Slack stock went up nearly 40 per cent during trading hours while Salesforce stock loses out by 5 percent, which basically says that Salesforce investors are not so convinced about this acquisition being a good thing, whereas Slack investors clearly are.

Slack and Salesforce share an integration, which is listed on appexchange since 2019.

There have been speculations on Slack being a good target for Salesforce that date back till August 2016, basically ever since the integration between Salesforce and Slack got announced.

The Bigger Picture

There are several aspects to this news.

Salesforce already has Chatter, a tool that often gets negative feedback. The company also owns Quip, which is essentially a solution for the collaborative creation of documents and spreadsheets.

And Salesforce has created work.com, as a solution to increase business resiliency and to improve collaborative work.

On a larger scale, and accelerated by the Covid crisis, the need for fast and efficient communication and collaboration of distributed work forces and their customers, using various means of communication is there. Actually, it has been there for quite some time, as the emergence of solutions from Slack to Teams, Zoom, etc. proves. E-mail is still very important, but only a part of this communication, which includes near instant chat, voice and video communications as well as collaborative work on documents – inside and outside an organization.

Another part is, that this communication needs to be tied to business processes and enable three things: Better outcomes by connecting all documents and communications to business processes and business objects, the ability to use this additional data to feed models that enable better predictions and/or actions and a reduction of efforts for the involved people, e.g. when it comes to finding information.

Businesses have a challenge here and are looking for solutions to fix it, and fast. This can be seen by the revenues of Zoom nearly quadrupling between Q2/19 and Q2/20 or the usage of Microsoft Teams skyrocketing from 13 million daily active users in July 2019 to 75 million daily active users in April 2020. At the same time Slack grew its paying customers between February and July 2020 by more than 20 percent, too.

Because of this, vendors of CRM solutions have increasingly been strengthening their built-in collaboration and productivity suites or are forming partnerships with companies in this space.

My Analysis and PoV

My first reaction was: Wow!

Slack, coming out of the developer community, has been an early player in the communications tools space. It does not only allow chat, voice and video communication for (smaller) groups but also allows embedding of bots as well as workflows. The company is clearly loved by small companies and startups and has been able to get a substantial number of customers.

As the numbers above show, Slack has not been able to capitalize on the Covid crisis and grow as fast as the competition. Further, Slack has not yet become a profitable business and also has a negative cash flow. Especially Microsoft putting an increased focus on Teams, put Slack, as well as Zoom, under significant pressure, as there is a considerable benefit to use MS Teams in an environment that already uses MS Office. Given that, I think that Slack is in a tight position. I dare saying that Slack on its own would not have been viable for much longer.

When it comes to Salesforce, Slack makes for a terrific addition to its portfolio for various reasons.

Slack enables Salesforce to significantly strengthen its productivity/collaboration suite, bringing it to a level that is no more far behind Microsoft. Productivity/collaboration is one of the four core pillars for a platform player. While Salesforce already has Chatter, this tool only works within a company and does also not allow for voice or video communication.

Neither Oracle nor SAP have a similar technology, although Oracle has its Beehive product that offers web and audio conferencing, plus a strategic partnership with Zoom, which it increasingly embeds into its CX suite. SAP has a strategic partnership with Microsoft and deployed MS Teams throughout its organization.

Slack also comes with far more than 100,000 customers and an expected revenue of in excess of $860 million in FY 2021, which would nicely add to Salesforce’s platform revenues, which in Q2 of FY21 rose to $1.2 bn.

In addition, the customers that Slack brings, are predominantly SMB businesses. In FY 20, less than 900 of 110,000 paying customers spent more than $100,000 for using Slacks services. This opens up a huge opportunity for Salesforce to tap into the SMB CRM market, which is a market that all big players are trying to scale down into. It remains to be seen in how far especially the smaller Slack customers accept a Salesforce that is seen as an enterprise player, as a partner.

In conclusion: For Salesforce, acquiring Slack makes perfect sense. It enriches the platform and therefore the Salesforce CX play. It is at least a jab against Microsoft and ringfences the Salesforce portfolio in the Clash of Titans with Oracle and SAP.