How Salesforce's acquisition of Slack enables the Frictionless Enterprise

Profile picture for user gonzodaddy By Den Howlett December 1, 2020 Audio mode
Summary:
An analysis of how Salesforce's acqiusition of Slack changes the way in which we can look at Frictionless Enterprise.

SAP ball fountain Walldorf
(via Kusser)

In its press release announcing the Slack acquisition, Salesforce said:

Combination of #1 CRM platform with the most innovative enterprise communications platform will create the operating system for the new way to work, enabling companies to grow and succeed in the all-digital world

That sounds a tad ambitious when SAP claims that 77% of the world's business transactions touch an SAP system. Aren't they the de facto operating system of the enterprise? Not in this brave new world and here's why. 

All things go digital

The pandemic has taught us one thing above everything - in a pandemic where the movement of people and goods is restricted, digital players win. That's one reason why Amazon's profit doubled year over year and why storied high street names like Debenhams, Topshop and Burton in the UK have suddenly vanished. Another reason is that Amazon, along with the likes of Facebook, Google and Netflix are, what Ben Thompson describes as Aggregators. These are companies that operate two sided markets where the marginal cost of providing access and servicing the market is virtually zero for both buyers and sellers. For more on this topic, it's worth exploring Thompson's Aggregation Theory.

None of that exists in the B2B enterprise world although there are things like industry consortia. Even once great channel masters like Walmart have felt the pain of not owning all the customer value and have had to find ways to mimic or outsmart the likes of Amazon. Note these remarks by Walmart's CEO on the last earnings call as reported by Stuart Lauchlan:

With the outbreak of COVID-19, the retail world clicked to a fast-forward, and our ability to adapt quickly has been crucial. Changes in customer behavior have accelerated the shift to e-commerce and digital. We were well positioned to catch and ride these waves given our previous work and investments. Our e-commerce and omni-channel penetration continue to rise, accelerating trends by two to three years in some cases. We’re convinced that most of the behavior change will persist beyond the pandemic.

Frictionless for the win

Now let us spin the Salesforce/Slack deal into the idea of the Frictionless Enterprise, a topic on which Phil Wainewright has written consistently over the years. This can be summarized in the following terms:

Whereas traditional models of the enterprise encourage a 'walled garden' model, the most successful participants in the digital economy are those who are the most open to connections.

This sounds similar to Thompson's idea about Aggregators. It also sounds similar to the ideas that HfS have proposed called the Digital OneOffice, a concept HfS used to helpfully tell us that Without a Virtual OneOffice Organization, you won’t survive this Pandemic Economy. In that polemic. HfS analysts said:

OneOffice is where automation becomes a native competency, where human performance is augmented by unleashing creativity and personal interaction, where the immediacy of data creates insights to support decision-making that can make or break the firm. In fact, if you can’t operate your organization as one integrated unit where data flows freely back and forth across your process chains from your customers to your employees, from your front office to what you used to call your back office, then you probably won’t survive much longer in today’s brutal Pandemic Economy, where digital is the only language operations now understand.

That may be stretching things a touch, but only a touch. The problem, as both Wainewright and HfS know is that Frictionless Enterprise doesn't exist in the enterprise world the way it does in the consumer world. But in my view, this is precisely where Slack/Salesforce comes in. 

As Wainewright pointed out in his pre-deal analysis:

Investors had been disappointed with Slack's performance during the pandemic, when the world switched en masse to remote working, and the likes of Zoom and Microsoft Teams saw adoption soar. Their success came because swapping in-person collaboration for video meetings is pretty straightforward, even though fatiguing — whereas learning how to use Slack is something people have to work at. A frequent lament of Slack CEO Stewart Butterfield back in the spring was that his product was too hard to just pick up. Here's how he framed it in comments on the company's Q1 earnings call back in June:

You just can't adopt Slack that quickly. You can't move from e-mail to channel-based messaging in that short amount of time. I wish that whole cultures could change overnight.

Slack became a victim of its own ambition. It never aspired to be a quick substitute, it wanted to be a whole new way of working. But that didn't lend itself to the kind of overnight switch that the sudden lockdowns of the pandemic demanded. While there were some successful rapid roll-outs, these were typically organizations that were already familiar with Slack. We have some sympathy at diginomica for Slack's stance, since we have a whole maturity model for enterprise digital teamwork in which Slack performs well. But you don't achieve maturity over a weekend. In playing the long game, Slack wasn't in the right place to capitalize on this year's sudden shifts in behavior.

Wainewright is convinced that the sudden switch to virtual everything - and specifically the explosion in virtual communication is what put Slack in a position where it could be acquired. For its part, Salesforce has not been able to break free from the enterprises into which it sells. This deal changes that equation and, I would argue, allows both Slack and Salesforce to start instantiating the Frictionless Enterprise in a meaningful way.

That's because while the likes of Zoom solve for the virtual meeting, Slack solves for the potential to solve for all relevant communications and collaboration needed in a B2B environment and, despite Butterfield's lament, potentially on to B2B2C where the real action lays. What's more, businesses can take a project approach that allows for creating and dissolving team participants in Slack environments to which - guess what - Salesforce provides access to the market. 

Who enables the Frictionless Enterprise?

If you take that view then you can see how this leaves the mega-vendors like SAP and Oracle in a quandary. More to the point, if Salesforce/Slack is the enterprise OS, then who enables the Frictionless Enterprise/Digital OneOffice? The notion that supply chain network operators fill that role is fanciful because if that was the case then it would have happened already. And it hasn't. It was a question I put to Phil Fersht, CEO HfS. He says that all the major outsource heritage player get a piece of this because:

They all love Salesforce. They'll all be salivating over this. 

That may be true but it needs a bit more than that. In that context, I've seen a pre-release version of a presentation HfS plans to show soon. While I am not permitted to show the slides, three things caught my eye:

  1. The Indian heritage outsources along with Accenture, Deloitte, etc will lead the charge as they themselves pivot from acting as the (relatively) low-cost (mostly manual) process execution providers to digital process operators. In that context, a good number of them are on buying sprees to pick up digital technology and talent. But they're not alone. I'm losing count of the number of acquisitions Accenture made this year. 
  2. TCS and Wipro in particular have been active in investing in startups, creating networks of firms that offer the digital capability for the future. TCS has 2,500 startups in its TCS COIN operation. They all know they can't do it alone and are preparing for a networked approach to portfolio operations. 
  3. Success is not a function of digital adoption but digital change management where cultures are switched on to the digital world. Those same Indian heritage outsourcers are well along the road to their own transformations. Their lessons will be taken to the world in ways we've not seen in the past. 

In and among all this is the notion of end-to-end processes, something that SAP has talked about for years but which has yet to be fully articulated. In the context of the discussion around Frictionless Enterprise, is it too fanciful to think that what was once the low-cost process operator are now at the center of what Salesforce/Slack is putting out into the world? Maybe. 

Another twist in the tail

But there is one more twist to this particular story. In a story Wainewright wrote titled: Workato reveals how it kept sales on track through the lockdown, he noted that:

The final area is the automation of workflows around webinars. This automates various elements of webinar creation, scheduling and follow-up. As people register and attend, the data is passed into Salesforce, enriched with background information from services such as Clearbit and Zoominfo, and then passed into a sales engagement platform for sales to follow up. Overall this has saved the events team 10 hours per week, which means they're able to do more webinars...

One customer set up a similar process that connected ServiceNow, Slack, Adobe Experience Manager, Salesforce and Marketo. Because Workato extracted the Salesforce data via APIs into Slack, there was no need to buy Salesforce licenses for a number of marketing and events team members, a significant savings.

In a separate note to me, Wainewright quoted his interview notes for the Workato conversation saying that:

PureStorage did something similar, starting with a ServiceNow ticket. Bhaskar Roy, Workato's Head of Growth told me:"Since everything is done through APIs and Slack, not everyone needs a Salesforce license."

Does this mean the Salesforce/Slack deal will kill Salesforce deals in the future? There's always that possibility but by then, any value is accruing to Salesforce anyway so it doesn't matter. But equally, if Salesforce is smart, it will figure out how to reach the end customer and help those businesses that want to go full-on as B2B2C providers with the mechanisms to do that. In which case, we will be much closer to the Frictionless Enterprise. 

What do you think? Does this make sense? Who would you rank as the true winners in this new world? Let us know in the comments.