Salesforce CEO Marc Benioff on why the $27.7 billion price tag for Slack is worth every cent
- Salesforce CEO Marc Benioff on "a marriage made in heaven" that comes with a hefty price tag.
Salesforce is buying Slack for $27.7 billion, that much we know. The practicalities of what happens next and how it will happen in terms of company integration and product development will only become apparent over time - the deal isn’t expected to close until late Q2 fiscal 2022. But for Salesforce CEO Marc Benioff, the geographical omens are good:
I get to look right out my window and do you know what I see? The Slack logo, because the Slack building is right next to my building [in San Francisco]. I’m looking into their building all the time….That idea that these two great companies are right next to each other in Salesforce Park is amazing….it’s a perfect match for both of us that’s going to extend our companies, make us both stronger and look, we’ve spent more than a decade focusing on this vision that we’ve had for social enterprise.
While that's a colorful, almost romanticised, notion of seemingly destined inevitability, in reality this is a mega-merger that has been put together and there will be operational and strategic questions to be answered. There has been speculation about such a coming together for a good while, but only now has the timing has been deemed to be ripe. Benioff credits Slack founder and CEO Stewart Butterfield and Salesforce’s Chief Operating Officer Bret Taylor - himself an addition to the team through the acquisition of his own firm, Quip - with putting together the particular plan that’s been put in place:
When they came to me and brought me this idea that Salesforce and Slack come together, my eyes lit up. I said, ‘This is the next generation of the Customer 360’. This is our ultimate vision of having this incredible user interface on top of all of these services, with all these channels and all the collaboration running on all of these devices and integration, interactions and the ecosystem,.
This is a vision for the Social Enterprise, argues Benioff:
All of the Social Enterprise presentations that I’ve delivered in my career, this makes it all real, this makes it all true, this brings the best of both worlds. The integration, it’s a marriage made in heaven. I can’t even think about how many conversations [Salesforce co-founder and technology visionary] Parker [Harris] and I have had on the vision and then to see Stewart come in with Bret and make it all real, well, that’s just awesome.
Pitching Slack as “a once-in-a-generation company and platform”, Benioff positions it as “the central nervous system of so many companies”:
So many of our great customers [are] connecting everyone and everything and now we could go even bigger, better, more exciting. It brings all the companies, people, data, tools together and you can see all the CRM information, sales, customer interactions. Slack Connect can securely work collaboratively with partners, suppliers, but especially important for us, customers. That’s the game changer.
This is bigger than I’ve ever thought it could be. When I look at companies from around the world who are implementing Slack, from the fastest-growing start-ups to Fortune 500 companies like Starbucks and Target and HP and what they’re doing, then when we integrate that with the single source of truth [of Customer 360), it’s a super charger. We already know more than 90% of Slack enterprise customers are also Salesforce customers, but we also see how much farther they can go.
Salesforce is its own use case exemplar here, says Benioff:
We’re a great Slack customer, but we could be doing so much more. When it’s integrated to Salesforce, it’s like ‘Wow!’ and I plan to bring that message to all my friends, all these CEOs that I work with all over the world, to help them transform their business and grow their businesses and help them to survive and succeed during this pandemic. We’re going to make sure that they just have this incredible single source of truth experience as well.
Nuts and bolts
OK, so that’s the vision thing. What comes next, assuming the deal closes as planned, will be the question of how the two companies will operate post-acquisition. The formal announcement of the acquisition has Slack operating as its own unit, with Butterfield staying on as CEO. That’s pretty much the model that Salesforce followed with other acquisitions, most notably Mulesoft and Tableau. Expect more of the same, says COO Taylor:
Our philosophy is very similar to our philosophy with Mulesoft and Tableau, which is number one, starting with our mutual customers and starting [with] how can we help every one of our customers benefit from the combination of these two technologies. Fundamentally, if you look at the happiest customers who use Slack, it is really the central nervous system for their company and that's really connecting every single application at their company, not just applications from Salesforce.
So that really means making sure Slack has an independent brand and continues to serve every single company and integrates with every single system in your company, while also making sure that it really achieves the vision that it really becomes sort of the user interface to Customer 360. It helps all of our customers be successful as they try to create a single source of truth for the customer data. I'm really happy with this strategy. It's really been effective with our integration with companies like MuleSoft and Tableau that have continued to thrive and continued to be technology agnostic, while also becoming really integrated part of our value proposition to our customers.
On the UI for Customer 360 angle, Taylor adds:
I’m really focused on not just selling, but customer success, which is really connecting the entire Customer 360. When we talk about Slack really becoming the user interface for Customer 360, this is what we mean. I really think this is a way of delivering that vision to our customers and for our customers to deliver a vision to their partners and their customers, through technologies like Slack Connect, that is really, really meaningful and really, really unique. And I think candidly it captures the new way that most of our customers think about their customer relationships. It’s not siloed by department anymore. It’s really an end-to-end journey and to really achieve that, we think that Slack is a tool that facilitates that in a really unique way and really helps accelerate our customers who are going through this transformation.
The past has really gone and we can all feel that. And the future is coming.
Benioff was inevitably in upbeat spirits on the post Q3 results analyst call which was, equally inevitably, dominated by the Slack news. So he might well be - he’s just got himself an early Christmas present in the form of a $27.7 billion addition to his corporate arsenal.
As noted above, it will take time for all the pieces to fall into place over what happens in terms of integration, but the Mulesoft and Tableau acquisitions have been examples of effective execution in action to provide confidence enough that Slack can slot into the Salesforce Ohana operationally.
For those of us who still have a set of chattering false teeth from the launch of Salesforce’s launch of its own Chatter workplace messaging offering a decade ago, this feels like the next big step in a long journey.
That said, this is a huge gambit on Salesforce’s part that comes with a huge price tag - Salesforce is buying at over 25x Slack’s projected revenue based on its own Q3 numbers, which is a pretty stunning multiple. It will take time to provide payback, but the prize on offer with the vision outlined by Benioff and Co is potentially one of high reward. Much more to come on this in 2021 and beyond.