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Salesforce Customers Not Swayed by Slack, Analysts Say

Tech Industry Reversal Intensifies With New Rounds of Layoffs

Salesforce Customers Not Swayed by Slack, Analysts Say

Carhartt’s CIO says the addition of the messaging app hasn’t made Salesforce’s products more appealing

When Salesforce Inc. bought the messaging application Slack for $27.7 billion almost two years ago, it said the marriage would “transform the way everyone works in the all-digital, work-from-anywhere world.” Corporate technology buyers so far aren’t impressed, analysts said.

The acquisition sought to capture the fast-growing market for communications and collaboration software during the Covid-19 pandemic, as employers sent workers home and shifted to remote systems. 

Today, companies in the market for customer-relationship management software—Salesforce’s signature product—don’t appear to be swayed one way or another by the addition of messaging and collaboration features, said Liz Herbert, a vice president and principal analyst at information-technology research firm Forrester Research Inc.

“We don’t really see, when it comes to Slack, any pent up demand from Salesforce’s base for a tool like that,” Ms. Herbert said. “It really hasn’t become something compelling,” she said.

Carhartt Inc. Chief Information Officer Katrina Agusti, who uses Salesforce’s sales, service and marketing clouds, said the Slack acquisition has so far not made Salesforce more useful or valuable to the company. 

“We did not explore using Slack more broadly” after the acquisition, Ms. Agusti said. Slack’s features and functions are similar to Microsoft Teams, Microsoft Corp.’s collaboration app, which the apparel company was already investing in and continues to use, she said.

Since the acquisition, Slack’s revenue growth has steadily declined. Salesforce reported about $402 million in Slack subscription and support revenue in the fiscal third quarter ending Oct. 31. That is quarter-over-quarter growth of 6.9%, but it reflects a slowdown from 9.3% growth in the second quarter and 11.7% growth in the first quarter, based on revenue figures from the company’s earnings reports.

Meanwhile, on Wednesday Salesforce said it would lay off 10% of its workforce as customers take a more cautious approach to spending.

“The Slack acquisition by Salesforce has not changed the trajectory of Salesforce up or down,” said Tim Crawford, CIO strategic adviser at Los Angeles-based enterprise IT advisory firm AVOA. “CIOs are broadly indifferent to the acquisition,” he said.

Salesforce said about 80 companies in the Fortune 100 use Slack. “Our business has great momentum, growing 46% year over year this past quarter, and customer retention is near a record best,” the company said.

Along with its earnings report in November, Salesforce announced that co-CEO Bret Taylor, a champion of the Slack acquisition, would be leaving the company at the end of January, with Chairman Marc Benioff becoming sole chief executive. Last month, Stewart Butterfield, Slack’s chief executive and co-founder, said he planned to leave the company in January, along with two other Slack executives. 

In an internal message, Mr. Butterfield said the move was unrelated to Mr. Taylor’s departure and that he was leaving Slack in good shape. He said there were challenges ahead in handling “an unusual amount of economic uncertainty and there’s no doubt that makes things harder.”

Salesforce, which confirmed plans to acquire Slack in December 2020, was a pioneer in selling cloud-based customer relationship management software on a subscription basis. More recently, it has sought to expand into other areas of the enterprise IT market, such as data analytics and software-integration services—often through acquisitions—in a bid to compete with Microsoft, an enterprise software juggernaut.

The move to bundle an ever wider range of IT software and services into a single platform can backfire, as CIOs and other corporate technology leaders take a closer look at spending, said Jason Wong, an analyst at IT research and consulting firm Gartner Inc.

As the number of features multiplies, companies are increasingly required to hire more tech workers to manage an ever wider range of tools—which can be too costly in a down economy, Mr. Wong said. “That’s really the struggle for customers, to maintain the pace with a company like Salesforce,” he said.

Slack can still be purchased as a separate app, outside of Salesforce’s CRM tools.

“The software industry has seen many consolidations, and sometimes that made contracting—and price negotiation—easier and simpler, and sometimes more difficult,” said Paul von Autenried, former CIO of Bristol-Myers Squibb Co. and now an adviser on technology issues to executives and boards.

CIOs are also girding for uncertain markets by paring down cloud spending and removing unused apps. As such, including Slack and other apps into a CRM platform might actually turn buyers away, Mr. Wong said.

Indeed, Salesforce and other tech providers have already started fine-tuning cloud services for specific industries, a made-to-fit approach known as industry cloud, which offers cloud-based software systems that are tailor-made for hospitals, banks and other businesses

Forrester’s Ms. Herbert said the recent departures of Mr. Taylor and the Slack executives might signal that Salesforce is shifting the focus back to its core products. “So far Salesforce’s pursuit of acquisitions haven’t provided a one-plus-one-equals-three outcome,” she said.      



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