Why Salesforce Acquired Slack, a Product Strategy Analysis

Author disclaimer: I worked at Salesforce as a software engineer for two years from 2018 — Aug 2020. This article was not written with any insider knowledge and contains my own personal thoughts. In this article, I will specify “partner” for companies that purchase software from Salesforce and “customers” for the end consumers and firms that partners sell to.

On December 1, 2020, Slack Technologies was acquired by Salesforce in its biggest acquisition to date for $27.7 billion. Why would Salesforce buy Slack especially since Slack lost $571 million in FY2020?

In this article, I’m going to explore the product strategy behind the Slack acquisition and hopefully give you some insights into how Salesforce sees the future of Slack and its alignment with Salesforce’s overall product strategy.

What does Salesforce actually do?

First, let’s talk about what Salesforce actually does.

Salesforce is a SaaS software platform that you can customize to produce a unique solution to run your business and connect to your customers.

Salesforce has several offerings which serve as the base for customization to start from:

  • Sales Cloud
  • Service Cloud
  • Commerce Cloud
  • Marketing Cloud
  • and more

Adidas is a prominent partner of Salesforce so I will use them as an example. If you’ve shopped at Adidas.com, you’ve used Salesforce’s Commerce Cloud. If you had a problem with your Adidas order and you contacted support, you’ve used Service Cloud. If you got a marketing email or text from Adidas, that was from Marketing Cloud. If you’re a retail store or a distributor that sells Adidas inventory, you’re a customer that’s listed in Adidas’s Sales Cloud.

To further illustrate my point, I’ve linked a video below to the keynote of Dreamforce 2019, Salesforce’s massive annual conference. The timestamp that I linked to shows an explicit example of how State Farm utilizes the Sales Cloud.

How State Farm customizes its Sales Cloud by utilizing the voice recognition feature

Companies can customize their Salesforce instances with both first-party features from Salesforce or third-party developed features from the App Exchange. Firms can even develop their own features and it’s not uncommon for companies to hire implementation partners such as Accenture and Deloitte to build out an entire suite of personalized Salesforce solutions for their unique use cases.

This customizable aspect of Salesforce has enabled it to become the dominant player in the industry.

This is an important note to stress as we will examine Slack through this lens later.

What has been Salesforce’s product strategy lately?

As Salesforce matures, the company’s vision is to build the operating system and network of B2B software, where both first party and externally developed apps can connect to each other to leverage the shared customer data on the platform.

Salesforce acquired Mulesoft in 2018, a company that provided a software solution to easily link your various data sources (such as POS data) via API integrations, supercharging their ability to connect with third-party data sources. With Mulesoft, you can connect data from all your various software platforms to each other and to Salesforce. An example is a healthcare provider connecting data from a patient information system into the Salesforce Service Cloud to provide phone support.

In late 2019, Salesforce unveiled a new feature called Customer 360. A new way to get a unified view of your customers throughout all of Salesforce’s offerings. In other words, a customer has one single representation throughout all of Salesforce’s apps.

Going back to our Adidas example, one way that Adidas can use Customer 360 is to tailor the marketing materials (Marketing Cloud) for each customer based on their purchase history (Commerce Cloud). You can pull in data from Commerce Cloud to specifically send marketing materials for pants to people who have bought pants before in the past. Here’s another example: have you ever gotten a marketing email from your favorite brand for a product that you already bought? Customer 360 can prevent that from happening as the campaign in Marketing Cloud will be aware of the available sales data from Commerce Cloud for each customer.

In other words, Salesforce is building out a platform where both first-party and externally developed apps can connect to each other to leverage the shared customer data on the platform.

How does Slack fit into this vision?

Now let’s take a look at Slack. What does Slack bring to the table? What is it truly that Salesforce is buying? The technology? The users?

Salesforce is buying what they see as a live chat platform that can utilize the massive amount of customer data on the Salesforce platform for customized solutions.

If you have used Slack and Microsoft Teams, you’ll realize that the differentiating factor is the massive amount of available integrations in Slack. You can automatically get a ping on Slack for a tweet, email, task status change on Trello, and many more that are readily available on the Slack integration store. Doesn’t Slack’s integration store remind you of Salesforce’s AppExchange? Hmm….

But wait you say, “I thought Slack is only for employees to talk to each other right? How do you connect with customers through Slack?” Slack recently launched Slack Connect, a way to connect with your customers through Slack. Slack partners can integrate meeting reminders, DocuSign contracts, and generally speed up collaboration with external customers.

Salesforce sees a world where salespeople don’t even have to leave the ecosystem to communicate with a customer. What can Salesforce, and external developers, do with an integration of customer data and a live chat application?

  • Share a Marketing Cloud dashboard of regional advertising results with a customer into the chat.
  • On a Sales Cloud case, link directly to the Slack chat so your salespeople can respond faster.
  • Sales Cloud can analyze the Slack conversation of previous successful deals to give AI-powered recommendations to a salesperson on what to say next on chat to close the deal.

A custom-built solution might look like this:

A pharmaceutical company is chatting on Slack with a hospital’s representative about a drug purchase. An external plugin pulls in data, via Mulesoft, from the company’s enterprise resource planning software (ERP) into the Salesforce platform. Sales Cloud might have a plugin that analyzes the latest production values and predicts what the supply will be in 6 months. That number is integrated into Slack and it automatically pops up in the sidebar of the conversation and the pharmaceutical salesperson closes a deal with the hospital using this number, the deal is marked close on Sales Cloud after automatically generating a DocuSign contract for the customer with a button. All of this can happen without manual consultation with a supply chain colleague or leaving Slack, and therefore the Salesforce ecosystem.

Conclusion

The integration possibilities are endless. With the Slack acquisition, Salesforce is cementing itself as the premier software platform for companies to build solutions that fit their specific use cases, now including live chat.

This strategy effectively produces a moat around their products by leveraging network effects. Developers will build plugins and products for the Salesforce ecosystem because of the massive amount of companies that have already bought into it. They can access the data collected from all the Salesforce first-party apps and from other plugins/integrations that would be difficult to implement externally.

Imagine a world where all your various software applications operate around one single source of truth of data and where you can tweak your software solutions to talk to each other and use that data. This is the future that Salesforce is building.

An aspiring technology and product leader. Currently an MBA candidate at Harvard Business School. Ex-SWE at Salesforce.