Will Salesforce and Slack's Partnership Hurt Microsoft?

By Markets Fool.com

Messaging start-up Slack recently integrated itsplatform with Salesforce's (NYSE: CRM) cloud-based CRM (customer relationship management) platform. Slack hopes that doing so will help it reach larger enterprise customers. Speaking to Wired, Slack's head of business development Brad Armstrong stated, "We've had integrations with things like Box and Google Drive that are used by very big companies, but this is the first time we've announced a partnership with a large enterprise."

Continue Reading Below

Slack. Image source: Google Play.

Armstrong also noted that Salesforce integration was the most requested integration among Slack's existing users. By integrating with Salesforce, users can search for customer information stored within Salesforce directly from Slack. They can also push information, like updates about sales leads, from Salesforce back into Slack's chat rooms.

Can this partnership help Slack challenge Microsoft's (NASDAQ: MSFT) Yammer and Skype in enterprise communications, while extending Salesforce's lead against Microsoft's Dynamics CRM? Let's examine the key facts to find out.

When a fast grower meets a market leader

Slack aims to streamline company communications by replacing email with chat rooms and private messages. The platform features chatbots that help organize company data, and various apps can be integrated. Slack claimed to have three million daily active users in May, triple its numberat the beginning of the year.

Continue Reading Below

Nearly a third of Slack's users pay for the freemium service, which is expected to generate about $64 millionin recurring revenue this year. That would be more than double the $30 million Slack expected to generate in 2015. But Slack still isn't profitable, andCEO Stewart Butterfield told the New York Times that the company was losing a "few hundred thousand dollars per month" last year.

Salesforce controlled 19.7% of theglobal CRM market last year, according to research firm Gartner. That puts it in first place ahead of SAP's 10.2%, Oracle's 7.8%, Microsoft's4.3%, and Adobe's 3.6%. Salesforce also posted the highest year-over-year market share growth of those market leaders with a 1.5 percentage point gain. It finished last year withover 150,000 customers, but it's unclear how many individual users that translates to.

Image source: Salesforce.

With this integration, Slack fulfills its users' wishes and gains access to major Salesforce customers, while Salesforce gives customers another reason to stick with its platform instead of switching to rivals like Dynamics CRM. Furthermore, Salesforce links to another enterprise communication platform to complement its prior integrations with Microsoft's Skype andOutlook.

But will that partnership affect Microsoft?

Slack wants to disrupt Microsoft's dominance of enterprise software and communications, but it won't be easy. Microsoft's Windows, Office 365, and Outlook are still standard issue software for most large companies, and the company is aggressively synchronizing all that information with its cloud platform Azure. Its newly launched AI and Research Group plans to tether that data to Cortana, Bing, and its "ambient computing" divisions.

Cortana. Image source: Google Play.

Microsoft already offers several apps for enterprise communications. Users can stick with Outlook for classic email conversations, use Yammer (integrated into Office 365) forteam and document collaboration, or Skype for chat and video conversations. Microsoft is alsoreportedly adding more collaboration features to Skype to counter Slack's growth.

The users across these Microsoft platforms dwarf Slack's three million active users, so Slack could struggle to convert large companies which are already tightly tethered to Microsoft's ecosystem. While Dynamics CRM is certainly a weak link in that chain, Microsoft claims that theplatform's online paid seats still grew 2.5x annually last quarter (but didn't report exact customer numbers). Moreover, Microsoft's communications solutions are already integrated with Salesforce, so it's doubtful that Slack can lure many companies away from Microsoft based solely on Salesforce integration.

The key takeaway

The partnership between Salesforce and Slack arguably helps the former more than the latter. Salesforce gains better access to the small and medium businesses which commonly use Slack, but Slack merely joins a group of other collaboration platforms with Salesforce integration. It's definitely a smart move for both companies, but it probably won't hurt Microsoft or enable Slack to aggressively expand into larger enterprises on its own.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

Leo Sun owns shares of Salesforce.com. The Motley Fool owns shares of and recommends Gartner. The Motley Fool owns shares of Microsoft and Oracle. The Motley Fool recommends Adobe Systems and Salesforce.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.